USMCA Annual Reviews Put Mexico Energy Policies in U.S. Spotlight, Expert Says
The United States-Mexico-Canada Agreement, or USMCA, will remain in place through 2036 after the U.S. declined to extend the trade pact in its current form, triggering an annual review process that industry experts expect will keep Mexico’s energy policies under regular scrutiny.
Mexico’s Economy Minister Marcelo Ebrard said Wednesday that, under the pact’s sunset clause, the agreement will remain in force for another decade after the U.S. opted not to renew it through 2042.
“Our goal will be to ensure that each annual review leaves fewer outstanding issues,” Ebrard said, adding that the agreement has never before entered the annual review stage.
Economists at Mexico City-based brokerage Finamex said during a webinar last week that the USMCA’s annual review mechanism is likely to institutionalize a period of “persistent friction” between the U.S. and Mexico, marked by recurring trade and political tensions rather than a rupture in bilateral ties.
While energy has not been among the most contentious issues in recent USMCA discussions, which have largely focused on tariffs affecting the steel, aluminum and automotive sectors, the Office of the U.S. Trade Representative, or USTR, has consistently identified Mexico’s energy policies as barriers to U.S. investment.
Among the concerns cited are constitutional and legal reforms aimed at restoring the dominant role of state-owned companies Pemex and the Federal Electricity Commission, or CFE, as well as what the USTR describes as frequent delays, unexplained permit denials and regulatory inaction affecting private companies seeking to operate in Mexico’s energy market.
“Multiple U.S. companies have reported exiting Mexico’s energy market as a direct consequence of these measures,” the USTR said in a report published earlier this year.
Ramsés Pech, a Mexico City-based energy analyst, said the U.S. decision does not place the agreement at immediate risk, but instead creates a framework under which Mexico’s energy policies could become a recurring point of discussion during annual reviews.
“This confirms that Mexico is not facing an immediate breakdown of the agreement, but rather a period of heightened political, commercial, and regulatory pressure,” Pech said.
According to Pech, Mexico’s dependence on U.S. natural gas, ongoing disputes involving Pemex and CFE, regulatory uncertainty surrounding permits, and stricter conditions for private investment are likely to remain among the issues raised during future reviews.
“Unless Mexico provides greater regulatory certainty, strengthens its energy infrastructure, and reduces friction with its trading partners, the USMCA’s annual review could evolve into a permanent mechanism of pressure on the country’s energy security and economic competitiveness,” he said.
Ebrard said the U.S. had identified 54 contentious issues when discussions began ahead of the July 1 deadline, but that “the vast majority” have since been resolved.
The minister added that U.S. Trade Representative Jamieson Greer had identified 14 outstanding issues that both governments expect to address through the annual review process.
“The United States will continue to engage with Mexico and Canada to address the agreement’s shortcomings and our trade deficits with these countries,” Greer said in a statement earlier Wednesday informing the U.S. administration’s decision not to renew the agreement.
Ebrard stressed that the U.S. decision does not terminate the agreement.
“If the United States wanted to withdraw from the agreement, it would have already done so. There is nothing preventing it,” he said.
An upcoming July 20 meeting with representatives from the three countries is expected to mark the beginning of negotiations under the annual review process, although no timeline has been established for how long those talks could last, Ebrard said.
Reporting by José Luis Adriano, jadriano@opisnet.com; editing by Karla Omaña, komana@opisnet.com