Can Mexico fix the USMCA energy dispute and amend AMLO’s mistakes?

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Most analysts predict Mexico would lose if a panel is asked to resolve the dispute on whether Mexican President Andres Manuel Lope Obrador has breached a trade pact by tightening state control of its energy market. That could be very costly to Mexico, raising the prospect of millions of US dollars in punitive U.S. tariffs.

Both countries have previously stressed that they want to sort out the disagreement before it reaches a panel.

Talks slowed down after Mexico’s economy minister resigned in October, and her successor cleared out several experienced trade negotiators, leaving an inexperienced team in charge.

The new team says it has put forward proposals that could deal with two of the four areas of consultations, and that they are also addressing other U.S. concerns. But there has been no clear indication of meaningful progress.

Resolution appears to hinge on whether energy nationalists inside the Mexican administration, who have taken their cues from Lopez Obrador, are prepared to compromise.

WHAT ARE MEXICO’S BARGAINING CHIPS TO TRY TO FIX THE DISPUTE?

Lopez Obrador has made energy policy a cornerstone of his presidency, making it hard for him to back down.

His administration is also mindful that Mexico’s assistance in tackling illegal immigration tends to carry more weight in Washington due to its prominence in U.S. domestic politics, giving the government tacit, if unstated, leverage.

Also, Mexican industry is so heavily integrated with the U.S. economy that a trade conflict could be painful for both countries at a time the region is attempting to reduce its reliance on Asia and bring down soaring inflation.

Still, the spat has hit investor confidence in Mexico, and Lopez Obrador is seeking U.S. help to finance solar power output in northern Mexico and attract investment in greener manufacturing, particularly in carmaking, a key industry.

Source: El Financiero

Mexico Daily Post