Last week, the United States and Canada presented the formal request for consultations on Mexico’s energy policy , the first step of the USMCA ‘s dispute settlement mechanism. However, there is a sense that the treaty’s main trading partner may have acted earlier.
“It strikes me that it has taken so long for the start of consultations on the part of the United States. It strikes me because these alleged violations have been going on for a long time,” Eduardo Pérez Motta , former head of the former Federal Competition Commission (Cofeco) and former representative of Mexico before the World Trade Organization, comments in an interview.
“It could have been tried to avoid, on the part of the United States, some destructive decisions of the Mexican government, which I believe have been in violation of the commitments that our country made, with more anticipation if this had been started before, even since it was they announced the bills,” he adds.
Now that time is running out so that, no later than August 20, the Mexican government indicates the place, date and time for the start of consultations with the United States and Canada, Eduardo Pérez Motta shares his point of view on this matter.
What points would Mexico be violating the T-MEC?
—The reform of the Electricity Industry Law, which, moreover, has become clear that it violates the Constitution, and the Judiciary has begun to express this through the different suspensions.
Also some previous administrative decisions, such as interconnection issues to wind or photovoltaic electricity generators, and all the problems that have arisen in the interconnection of private combined cycle generators.
What I think could be violating the Mexican government’s decisions on market access is national treatment, that is, different treatment of products or companies that are exporting from the United States compared to Mexican companies, particularly Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE).
There may also be a violation of restrictions on exports and imports. A series of restrictions have been imposed on imports of hydrocarbons. They have closed hydrocarbon deposit plants with unclear and unsustainable arguments from the legal point of view.
In terms of investment, regulators are making decisions that benefit state companies over private ones that have foreign investment and are in Mexico.
What will happen if the ruling is against Mexico?
—If the panel decides in favor of the United States and Canada, Mexico has to reverse the decisions it made and put the even playing field between foreigners and Mexicans. The commitments that Mexico made in the T-MEC and that are in the Constitution are also in our own laws.
If Mexico does not correct it, it would have to pay for those damages, and if it does not pay, the United States could impose a series of tariffs.
Here it would be products that would hurt us enormously and in which many national producers would be, basically asking ‘Why am I going to pay for a decision that was made in a sector that has nothing with me?’
That they put tariffs on imports of avocado, or automobiles or some auto parts made in Mexico. The United States could select where it hurts Mexico the most, even if it hurts them too.
The USTR itself indicates that it is not its objective to impose tariffs, but rather to correct those decisions.
Would the tariffs be permanent?
—If Mexico corrects, they could be eliminated, but neither would they be permanent in the sense that, once the costs were paid in net present value of the costs imposed on North American companies, those tariffs would have to be eliminated.
This has a fixed cost and an investment cost, in flows. So, as long as the costs in flows remain, to that extent you can keep the tariffs.
Will the ruling stick only to what the T-MEC says?
—The panelist’s obligation is to see if it was breached, to analyze the facts. Mexico will have to explain why it does not fail to comply with the T-MEC according to its interpretation, with its obligations.
There have already been two messages from the president: One was a slightly comical message, which shows the great histrionic capacity of our chief executive, of sending messages to his allies that he is not afraid of this, by playing the song by Chicho Che . Something nice but shallow.
The other thing was an email that he apparently sent to Jesús Seade in which he apparently told him that we are not breaching anything.
Will the ruling be for or against Mexico?
—In the T-MEC there are two ways to resolve differences: one is government to government, which is what is happening right now.
The second, which has not been explored yet, is that the affected companies start a company-state procedure, that they go to the government and say ‘you are affecting me’.
This has not happened because the companies have seen that the fastest way to try to force the government to comply is through the Judiciary, which is why they have gone to the amparo process. Here there have been a large number of suspensions and complaints from the Chief Executive to the Judiciary.
According to my reading, I am convinced that Mexico is failing to comply with these commitments, there are quite clear violations, but the companies have preferred to follow the path of injunctions.
Will the energy issue be resolved in the consultations?
— The probability is almost zero, especially after seeing the president’s response during the morning last week. If the arguments are along those lines, in the song ‘Oh, how scary!’ of Chico Che, I would say that the possibility that they will be resolved in consultations is zero.
Thinking about how the chief executive has operated in many of these situations, the president is going to prefer to blame someone else.
Starting from the assumption that Mexico is guilty of violating commitments, I see that the president will hardly accept it; he will always prefer to tell his audience that it is someone else’s fault and not his.
So, he prefers that this go to the panel and be the panelists who comment on the mistake of not understanding the T-MEC, and tell his audience that someone else is trying to hit the Mexican people, when what is hitting them the most is having no competition in a market that affects us all.
How long will it take to reach a solution?
—At the end of the day, this is going to bring us almost to the end of this administration. If tariffs were to be imposed, it would be near the end of this administration and the beginning of the next.
Even if the government remains in Morena, let someone else decide how to put this in order, and if we want to have an energy sector that is what the Mexican people deserve, or an energy sector in the hands of the Mexican State, which is equivalent that nobody has it, even if it seems that it is ours.
