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Biden administration moving to escalate energy trade dispute with Mexico

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WASHINGTON: President Joe Biden's administration has asked U.S. energy companies to prepare affidavits documenting how Mexico’s protectionist policies disrupted their investments as Washington prepares to escalate a trade dispute with its neighbour, according to people familiar with the discussions.

The request for affidavits from major US oil and renewable energy companies represents the latest and clearest signal that the Office of the United States Trade Representative (USTR) plans to seek an independent dispute settlement panel under the United States Mexico Canada Agreement trade pact, or USMCA.

Mexico President Andres Manuel Lopez Obrador's steps to roll back reforms aimed at opening Mexico's power and oil markets to foreign competitors ultimately sparked the trade dispute.

U.S. energy and power companies, such as Chevron and Marathon Petroleum, which sought to expand in Mexico, have complained that they have been denied simple permits and applications in decisions that favoured state oil company Petroleos Mexicanos (Pemex) and national power utility Comision Federal de Electricidad (CFE).

The United States is likely to seek a dispute panel before the end of the year if talks on the issue continue to stall, and the affidavits represent evidence that would be included in the panel request, the sources said. If that panel rules against Mexico and it fails to take corrective action, Washington could ultimately impose billions of dollars in retaliatory tariffs on Mexican goods.

The steps add to a significant worsening of trade relations between Washington and Mexico City, even as their economic integration grows. In August, USTR requested a USMCA dispute settlement panel to intervene in a disagreement over Mexico's curbs on genetically modified corn imports. Mexico now buys about $5 billion worth of US GM corn annually, mostly for livestock feed.

Like the energy policies, Washington argues that banning GMO corn for human and animal consumption violates Mexico's obligations under the trade pact.

Obrador is seen as a major obstacle to resolving both disputes since he sees energy and corn as important to Mexico’s national identity.

The White House has hoped to avoid escalating energy trade tensions with Mexico as it sought help on immigration and drug trafficking, but talks that began last year have made little progress. Raising the stakes in the dispute carries significant risk for Biden, who will face Republican criticism over his handling of immigration and drug trafficking as he seeks reelection in 2024. — Reuters

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