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U.S. – Mexico – Canada Energy Dispute on Hold in Election Year – Argus

The US and Canada filed for energy consultations under the US-Mexico-Canada free trade agreement (USMCA) in July 2022
The US and Canada filed for energy consultations under the US-Mexico-Canada free trade agreement (USMCA) in July 2022.

Rebecca Conan, Argus Media

EnergiesNet.com 01 19 2024

The US and Mexico are likely to keep their energy dispute on hold this year as domestic attention turns to presidential elections and the appetite for escalating disagreements remains low, the Baker Institute said.

“Numerous trade disputes have arisen over Mexico’s reluctance to open its energy market … but the US government will likely pay little attention to Mexico’s foreign policy through 2024 … due to distractions at home, including its own presidential election in November 2024,” according to the Mexico Country Outlook 2024 that Rice University’s Baker Institute in Houston published today.

A Mexican presidential election is also scheduled for 2 June and Lopez Obrador’s political priorities have been firmly focused on reiterating his party’s energy sovereignty policy.

The US and Canada filed for energy consultations under the US-Mexico-Canada free trade agreement (USMCA) in July 2022 and negotiations have dragged on since an initial consultation period was extended by mutual agreement in October the same year.

The complaints center around Mexico’s attempts to dial back the 2014 energy reform over the last five years with laws to curtail private-sector renewable energy development and prioritize CFE power dispatch. The US complaint also addresses an attempt to nationalize natural gas supply under gas transport contracts that the Mexican supreme court has since thrown out.

The US or Canada could call for a panel arbitration at any moment to escalate the dispute but neither country has had the appetite to do so.

“Neither country has [activated the panel arbitration], apparently preferring to avoid exacerbating the dispute and threatening Mexico’s cooperation on other issues (such as unauthorized immigration),” the Baker Institute said.

Mexico has agreed to work with the US on controlling migration along the southern border, but the diplomatic relationship has been periodically fractious. With focus turned elsewhere, the defining characteristic of the US-Mexico relationship in 2024 will be a “muddling-through approach,” the Institute said.

Meanwhile, the Canadian government has continued to negotiate and has even presented alternative proposals to remedy the dispute. But pressure from affected Canadian companies has eased amid an uptick in electricity demand that has required dispatch of all power sources, even those lower down the revised dispatch order, a source with knowledge of the discussions told Argus.

argusmedia.com 01 18 2024

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