The Biden administration plans to request consultations with the Mexican government over energy policies that the United States believes have hurt American companies, an action that could result in punitive tariffs on Mexico if attempts to resolve the dispute fail, the administration said on Wednesday.
President Andrés Manuel López Obrador has worked to strengthen the dominance of Mexico’s two main state-owned energy companies — the Federal Electricity Commission, or CFE, and the oil and gas company Pemex — in an effort to make the country more self-sufficient.
But American energy companies say those steps have made it increasingly difficult for them to do business in Mexico, which they say gives its own giants favorable treatment, including on pricing, emissions standards and contract terms.
Biden administration officials, too, have criticized the Mexican government for these practices, saying they limit competition, undermine U.S. companies and U.S.-produced energy, and hinder the fight against climate change.
Officials at the Office of the United States Trade Representative told reporters on Tuesday that Mexico’s actions appeared to violate the United States-Mexico-Canada Agreement. That free-trade deal, which went into effect two years ago, bars the countries from adopting policies that discriminate against the others and requires them to curtail their use of state-owned enterprises.
The officials said the United States had raised its objections to Mexico’s energy policy with Mexican officials on multiple occasions over the last 18 months.
“We have repeatedly expressed serious concerns about a series of changes in Mexico’s energy policies and their consistency with Mexico’s commitments under the U.S.M.C.A.,” Katherine Tai, the U.S. trade representative, said in a statement. “We have tried to work constructively with the Mexican government to address these concerns, but, unfortunately, U.S. companies continue to face unfair treatment in Mexico.”
Last week, Mr. López Obrador prodded President Biden on the issue of energy prices during a visit to the White House. He told Mr. Biden that he hoped Congress would approve proposals to lower gas prices, and noted that Americans had been crossing the border to buy gas in Mexico, where, he said, it was a dollar cheaper. He did not elaborate on the reason that Mexican gas prices are cheaper: The government subsidizes them.
Under the United States-Mexico-Canada Agreement, parties typically have 30 days after a request for consultation to resolve the issue. If an agreement isn’t reached, the United States can request that a panel of trade and legal experts be set up to examine whether Mexico has met its obligations under the trade agreement.
If that panel decides that Mexico’s actions have been inconsistent with promises it made in the trade agreement, and Mexico still fails to respond, the United States is likely to be granted permission to impose tariffs on Mexican products in an amount equivalent to the damage done to the American industry.
In a call on Tuesday, senior administration officials said that the goal was to reach a resolution, not to impose more tariffs, but that levies were a possibility down the line if no other agreement could be reached.
Read More: The Biden administration will challenge Mexico’s state control of its energy industry.