Joe Biden and Andrés Manuel Lopez Obrador in Mexico City, Jan. 9, 2023. Andrew Harnik (AP)
First it was the threat of an “ultimatum,” and now a report with anonymous sources from the Portal agency suggests that the US government is preparing legal proceedings against Mexico for an alleged violation of the USMCA free trade agreement. Everything seems to indicate that the White House is ready to escalate its second trade dispute with its neighbor, which will be resolved by a dispute settlement body, but according to one of the trade deal negotiators, the delay in taking action has more to do with the political Calculation of the United States, which does not want to strain a bilateral relationship in which the immigration and security agendas are highlighted in red.
In 2021, President Andrés Manuel López Obrador repealed much of the legislation allowing private companies to participate in the energy sector. Since then, the Joe Biden administration has attempted to use diplomatic channels to resolve the dispute, which it says violates the USMCA. Although treaty rules give the United States the right to bring the dispute to a panel since October, the country has not done so.
In March, Portal reported that the White House was preparing an ultimatum as a final warning to Mexico about an escalation in the energy trade dispute. On Wednesday, the agency assured that companies affected by the legislation in Mexico are preparing statements designed to take the case to a controversy panel.
“It seems that the possibility of an energy panel is now being taken seriously,” comments Kenneth Smith, economist and chief negotiator for the technical arm of the USMCA under Enrique Peña Nieto’s administration. “We’ve seen a reluctance by the Biden administration to pull the trigger on dispute-settlement issues,” says the economist, “and I think that ties into broader foreign policy issues.” Presidential elections are due in 2024 in both countries.
In the United States, two issues are expected to be at the heart of the election and related to Mexico: the influx of migrants across the southern border and the trafficking of fentanyl in the hands of organized crime, a powerful drug that has generated costs Around 71,000 people have died since 2021, according to the National Institute on Dorgas Abuse (NIDA). Last week, US media reported that about 91,000 migrants came together as families, a number that tops the record 84,486 crossings recorded in May 2019 under the Donald Trump administration.
Trade disputes move in a different direction as the USMCA provides its own tools to resolve them, such as sanctions and tariffs. But it’s possible that one plane spilled into another. “We heard that [la Representante Comercial de EE UU] USTR had planned to seek the panel on energy since late last year, Smith said, “but there have been orders from the White House not to do so.” “I think it’s part of that political calculus by the Biden administration, which is very careful not to disrupt cooperation on other very important issues of the bilateral relationship, such as immigration and security.”
However, the results were not very good. The common border between the two countries continues to receive a large number of people who wish to emigrate to the United States for economic or security reasons. Trafficking in fentanyl has not declined significantly.
“Nor if you analyze it soberly, it hasn’t achieved what the Biden administration was looking for with Mexico on migration and security issues,” Smith says. “What we do know is that domestic political pressure is increasing in the United States in Congress, in the states.” On the one hand, the farming states are complaining about Mexico’s ban on GM corn, on the other hand, the states are complaining that Export Energy has complained about complained about López Obrador’s protectionism.
“The Mexican government’s calculation was to expand dialogue as much as possible, avoid roundtable discussions and continue to address the issue through dialogue,” Smith says. This could have two consequences: either do without the panels entirely or only allow them to arrive after the presidential elections in Mexico, which are scheduled to take place in mid-2024. “If the United States requests the panel in energy matters now or in the coming months, the arbitration process will be initiated.” “The decision will come after the presidential elections in Mexico, that is, already in the transition period or even shortly before the arrival of the new government after the October 1st here in Mexico,” Smith estimates.
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