The Washington Post
No choice but to push back
Mexico’s energy policy runs up against American interests and the USMCA.
THE UNITED STATES and Mexico have plenty of tough issues to deal with, from the lingering coronavirus pandemic to inflation to the continuing surge of migrants through their mutual border. It would be best for both countries if they could address these issues in an atmosphere of calm and mutual cooperation, with no gratuitous irritations to this vital bilateral relationship.
Unfortunately, such irritation is all too likely as long as Andrés Manuel López Obrador occupies the Mexican presidency. A quirky populist whose worldview centers on restoring what he misperceives as the lost glory of Mexico’s nationalized oil industry, Mr. López Obrador inherited a modified version of the North American Free Trade Agreement that his predecessor had negotiated with President Donald Trump; it took effect on July 1, 2020. And yet Mr. López Obrador has continued to press for greater control over Mexico’s energy markets, to the point where his policies now arguably violate the terms of the revised trade pact, known as the U.s.-mexico- Canada Agreement (USMCA). The Biden administration has no choice but to push back.
At issue is a new Mexican law that awards a state-run producer, which relies heavily on coal, a greater share of the electric power market, to the detriment of private U.s.-owned firms, which include wind and solar companies. In addition, a 2019 regulation awarded Pemex, the state-owned oil company, extra time to reduce the amount of sulfur in automotive diesel fuel, an advantage over U.s.-supplied diesel. The Biden administration also accuses Mexico of discriminating against U.S. firms in licensing and permitting. This is the rare complaint that blends environmental issues — Mr. López Obrador’s tilting of the playing field in favor of Mexican fossil fuels — with traditional free-trade concerns. A bipartisan coalition in Congress opposes Mr. López Obrador’s policy, as do industry groups from the American Petroleum Institute and the American Clean Power Association. The government of Canada has also supported the U.S. position.
As called for under the USMCA, the United States has requested “consultations” with Mexico over the issue; if that does not bear fruit within 75 days, the parties will move to a formal dispute resolution, with punitive tariffs awaiting Mexico if it is found to be at fault. This is especially pointless and regrettable given the main victims of Mr. López Obrador’s policies are likely to be Mexican consumers and business, who will have to pay more for energy. Mr. López Obrador should be more concerned than he seems to be about the damage to Mexico’s international prestige caused by the contradictions between his energy policy and the country’s international climate commitments.
For now, though, Mr. López Obrador is enjoying a nationalistic sugar rush, mocking the United States’ request for consultations in a recent news conference. This was especially inappropriate — and ominous — in the context of other recent outbursts in which the Mexican president has labeled domestic critics “traitors.” By telling Mr. López Obrador, in effect, “we’ll see you in court,” the United States is standing up for its own interests and, in a real sense, the best interests of Mexico’s people, too.