US plans ultimatum to Mexico in energy dispute that raises threat of tariffs

The government of President Joe Biden plans to send Mexico an ultimatum in the coming weeks, seeking to break the deadlock in an energy trade dispute, as there are more bipartisan calls for the United States to toughen its position, according to sources familiar with the discussions.

The move would represent a significant escalation in the already tense relationship between Biden and his Mexican counterpart, Andrés Manuel López Obrador.

López Obrador’s decision to backtrack on reforms aimed at opening Mexico’s electricity and oil markets to external competitors sparked the trade dispute.

The Office of the United States Trade Representative is expected to do what was described as a “final offer” to Mexico’s negotiators to open their markets and agree to greater supervision, three people familiar with the talks told Reuters.

If not, Washington will request an independent dispute settlement panel under the United States Mexico Canada Agreement, or USMCA, they said.

The United States and Canada requested dispute settlement talks with Mexico in July, 250 days ago. Under the TMEC rules, after 75 days without a resolution, they are free to request a dispute resolution panel, in which a third party decides on the case.

If the panel rules against Mexico and Mexico does not take corrective action, Washington and Ottawa could ultimately impose billions of dollars in retaliatory tariffs on Mexican products.

The White House had hoped to avoid escalating trade tensions with Mexico while seeking help on immigration and drug trafficking, but months of talks have borne little fruit and the government has run out of less belligerent options, the sources told Reuters.

Raising the stakes in the dispute carries significant risk for Biden, who is expected to launch his re-election campaign in the coming weeks and will face Republican criticism over his handling of immigration and drug trafficking.

Biden needs Mexico’s help to control the border after COVID-era restrictions were lifted on May 11.

A US official acknowledged growing frustration over the lack of progress in the talks. “We want to see clear progress on this matter and address the concerns that have been raised by our negotiating teams.said the official, who did not want his name used because the discussions were private.

A USTR spokesman declined to comment on energy consultations with Mexico, but Trade Representative Katherine Tai hinted at a possible escalation during a Senate Finance Committee hearing on Thursday when asked about the talks.

“We are working with Mexico on specific and concrete steps that Mexico should take to address the concerns raised in our request for consultations. This is a very live issueTai declared.

Source: Reuters