Assessing the Impact of AMLO's Energy Policies: Insights from Advisory Board Members and Global Fellows
Pamela K. Starr
Professor of the Practice of Political Science and International Relations, University of Southern California
The USTR’s request for affidavits from U.S. oil and renewable energy companies presenting how Mexico’s energy policies have disrupted their investments is a clear sign that the United States it planning to escalate its USMCA energy dispute with Mexico to the panel phase, likely before the end of the year, if consultations remain stalled. This comes on the heels of the August 17 decision to move to the panel phase of another dispute with Mexico, this one over Mexico’s decision to exclude GMO corn (most of what the U.S. produces) from its food supply, and the August 22 decision to form the first labor panel under the USMCA focused on a long-standing dispute in a Zacatecas mine. Together, this sequence of events suggests increased bilateral economic conflict for the coming year. This conclusion, however, is misleading. While the U.S. is ratcheting up pressure on Mexico, it is doing so in a very gradual, calculated manner that is designed to prevent these disputes from coming to a head before the completion of the dual presidential elections next year. The United States is currently refusing to respond to a previous USMCA panel ruling against the U.S. interpretation of the rules of origin in the auto sector out of concern that doing so could have negative impact in U.S. domestic politics. Mexico has not responded, even though it has the right to impose sanctions against the United States. This, and the glacial pace of the energy discussions, indicate that the two countries have agreed to a sort of non-aggression pact regarding the USCMA disputes through 2024. For now, it seems that all of this is all a lot of noise. We’ll see what happens in 2025.
Ambassador Anthony Wayne
Career Ambassador, Mexico Institute Board Co-Chair, Public Policy Fellow, Wilson Center
If the US calls for a USMCA dispute settlement panel over some of Mexico’s policies in the energy sector, it will be a major test for the ability of the US-Mexico-Canada trade agreement to solve difficult disputes between the countries. It is a test worth having for considering the rights of companies involved and for seeing whether USMCA can successfully resolve politically difficult and economically important disputes using the mechanisms on which Mexico, Canada and the US agreed.
The USMCA trade agreement has fostered impressive trade growth across North America and particularly for Mexico. US and Canadian companies invested in Mexico’s energy sector have been arguing for several years that Mexico is violating key provisions of the USMCA agreement and taken costly steps favoring state-owned energy companies at their expense. Experts say that the Mexican moves have raised doubts about how Mexico may treat other investors and endanger Mexico’s ability to provide sufficient energy for future manufacturing investments.
In July 2022, the US and Canada asked Mexico to start consultations to find solutions. Since, there have been numerous efforts to make progress, but without evident progress.
If this dispute moves to a USMCA panel, the panel will not just render judgement on the US and Canadian complaints, but also on steps the Mexican government has taken to achieve one of Mexican president Andres Manuel Lopez Obrador’s top objectives: to reverse the previous energy reforms and return Mexico’s state-owned energy agencies to a dominant position. AMLO’s administration has used an array of government actions to do that, which include some that appear to violate investors' rights and promises of regulatory transparency in USMCA. This energy case touches an estimated $20 billion plus in private sector investments.
About the Authors
Earl Anthony Wayne
Former Career Ambassador to Afghanistan, Argentina, and Mexico; Distinguished Diplomat in Residence, School of International Service, American University
Professor of the Practice of Political Science and International Relations, USC Dornsife College of Letters, Arts, and Sciences; Fellow, Center on Public Diplomacy and Professor, University of Southern California; Adjunct Fellow for Mexico and U.S.-Mexico Affairs, Pacific Council on International Policy
The Mexico Institute seeks to improve understanding, communication, and cooperation between Mexico and the United States by promoting original research, encouraging public discussion, and proposing policy options for enhancing the bilateral relationship. A binational Advisory Board, chaired by Luis Téllez and Earl Anthony Wayne, oversees the work of the Mexico Institute. Read more