Lazy eyes listen
President Joe Biden’s administration is reportedly planning to escalate a trade dispute with Mexico, demanding that its southern neighbour open up its power and oil markets to US suppliers or face arbitration and retaliatory tariffs.
According to Reuters, the demand will be made in the coming weeks through a “act now or else” notice to Mexico City from US trade officials, citing unidentified people familiar with the discussions.
The issue is Mexican President Andres Manuel Lopez Obrador’s decision to reverse reforms aimed at opening Mexican energy markets to outside competitors, allegedly in violation of the 2018 US-Mexico-Canada Agreement (USCMA), a trade agreement that requires the countries to reduce state-owned enterprise protections.
Last July, the United States and Canada requested settlement talks with Mexico over the energy dispute. After making little progress since then, the Biden administration has decided to increase the pressure by making a “final offer” requiring Mexican officials to remove trade barriers and agree to increased oversight.
If they refuse, the US will request that the dispute be resolved by an independent panel, as required by the USCMA. If Mexico loses the arbitration and still refuses to take corrective action, the United States and Canada may impose punitive tariffs on Mexican goods worth billions of dollars.
According to Reuters, the White House delayed moving forward with the trade dispute in order to avoid an escalation of tensions as Biden sought Mexico’s assistance in addressing an illegal immigration crisis and drug trafficking. In recent months, relations between the two governments have deteriorated. Only a few weeks ago, Lopez Obrador called US officials “liars” after Biden’s administration accused Mexico of human rights violations. “That’s just the way they are,” he explained. The United States considers itself “the world’s government.”
According to US trade officials, Mexico’s government has unfairly favoured state-owned utility CFE and state-owned oil company Pemex at the expense of American power producers and oil companies. Chevron and Marathon Petroleum, both based in the United States, have reportedly struggled to obtain permits to operate in Mexico.
Last year, the United States ran a record trade deficit with Mexico, as the value of exports to the country fell more than $130 billion short of imports. In fact, Mexico accounted for approximately 14% of Washington’s global trade deficit, which also reached an all-time high.