OilPrice By Alex Kimani - Mar 28, 2023
• AMLO’s roll back of reforms aimed at opening the country’s power and oil markets have angered the U.S. and Canada.
• The Office of the United States Trade Representative will make a"final offer" to Mexico negotiators to open up its markets and agree to increased oversight.
• Mexico’s move to reduce crude exports in order to refine its own crude may have a negative impact on the country’s economy.
he former U.S. administration was characterized by numerous trade wars involving multiple battles with various countries, including close American allies such as Canada. The battles frequently followed a particular U.S. legal rationale, with Trump labeling foreign imports a national security threat before imposing tariffs and/or quotas on imports.
The current administration has a slightly better track record, with Biden rolling back some Trump-era tariffs including removing tariffs on Canadian solar products, but electing to keep most of them in place. And now, Washington finds itself on the precipice of yet another trade war, with the Biden administration planning to send Mexico an "act now or else" message in the coming weeks as their energy dispute threatens to boil over.
The decision by Mexican President Andres Manuel Lopez Obrador toroll back reforms aimed at opening Mexico's power and oil markets to outside competition has angered the U.S., Canada and Europe and triggered bipartisan calls for the U.S. to get tougher on its southern neighbor. In recent years, U.S. Big Oil companies, such as Chevron Corp. (NYSE:CVX) and Marathon Petroleum Corp. (NYSE:MPC), alongside a host of solar and wind energy companies, have struggled to obtain permits to operate in Mexico.
The Office of the United States Trade Representative (USTR) will make a"final offer" to Mexico negotiators to open up its markets and agree to increased oversight. If they fail to accept the final offer, the U.S. will request an independent dispute settlement panel under the USMCA trade agreement. The U.S. and Canadademanded dispute settlement talks with Mexico nearly a year ago, far more time than the 75 days required under USMCA rules before aggrieved parties can request a dispute settlement panel if they fail to reach an agreement.
These developments increase the risk of another full-blown trade war between the U.S. and Mexico. The U.S. is Mexico’s largest oil export market, with the Latin American nation selling American refineries 710,000 barrels per day in 2021 while also importing 1.16 million b/d. Previously, Trump had imposed a25 percent levy on Mexican steel and 10 percent on aluminum, arguing that cheap imports were a national security threat and were decimating whole communities. However, he later lifted the tariffs, marking the first time the iconoclastic president backed down on protection once it had been imposed.
Energy IndependenceSince becoming Mexico’s president in 2018, Obrador has undertaken various radical reforms in the country’s energy and power sectors as he endeavors to achieve elusive energy independence. Two years ago, he announced a rather controversial plan to phase down oil imports, reversing a major reform plan enshrined in the constitution in 2013.
More:
https://oilprice.com/Energy/Energy-General/Mexico-Risks-Trade-War-With-US-Over-Energy-Reform-Roll-Back.html
