Dispute Consultations with Mexico Stalled by Other Political Pressures, Panelists Say

The U.S. and Mexico have been consulting about U.S. complaints about favoritism to Mexican energy providers for 11 months, with no public movement toward a dispute settlement panel, and Karen Antebi, a former NAFTA negotiator, said she doesn't expect that to change in the next year.

"It can perhaps be explained that the United States has other priorities when it comes to Mexico -- immigration and drugs," she said at Georgetown Law's International Trade Update on June 14.

Antebi, who also led stakeholder engagement for the Mexican government during the NAFTA renegotiation, said that in the case of both the energy consultations and the consultations on Mexican restrictions on genetically modified crops, Mexican President Andres Manuel Lopez Obrador, or AMLO, made promises in his campaign to take the actions that the U.S. complains violate the USMCA.

Both are based on his belief that it's better for Mexico to be self-sufficient, she said.

Antebi said AMLO thinks the differences on corn can be negotiated, and that there should be a creative way of solving it. His revised decree on GMO corn said it only applied to white corn, used for tortillas, not corn for highly processed snacks or cereals, or for animal feed. Antebi said 78% of corn fed to animals is imported from the U.S., and most of Mexico's corn imports are for animal feed.

Ben Conner, an agricultural trade consultant who also spoke during the conference session, said the restrictions on GMO crops and the future ban on crops treated with glyphosate are not based on scientific principals or risk assessment, as required in the sanitary and phytosanitary chapters.

"At this point, I think the measures are so … clearly in violation, I don’t think there’s much patience from the U.S. industry, U.S. government standpoint for something along those lines," he said of a negotiated settlement.

Antebi said she thinks there has to be recognition by the U.S. Trade Representative that the Mexican government is in a tough spot, because the Mexican Supreme Court said that before any GMO corn for human consumption is imported, or before crops treated with glyphosate are imported, government officials have to prove it's not harmful to human health.

"It’s got to prove a negative, and that’s very hard to do," she said.

Vanessa Sciarra, vice president for trade and international competitiveness at the American Clean Power Association, said during the discussion that she and her dispute partners at the American Petroleum Institute are painfully aware of how long the consultations have been going.

"We’re in it for the long haul; we believe the case is winnable," she said. "We do pressure the USTR often to give us an update and tell us when they’re going to have a panel."

Sciarra agreed that cooperation fighting drug trafficking and cooperation on irregular migration play a big role in the administration's lack of willingness to ask for a dispute settlement panel.

She said she thinks Mexican bureaucrats are interested in trying to find a solution, but at the political level, there is no interest.

Sciarra gave advice to lawyers at the conference about how to get USTR support for a dispute if they represent an industry facing discrimination in Mexico or Canada.

She said if it's only one company complaining to a USTR staffer, "They say: where are your friends?"

In ACP's case, it coordinated with API, and got members of pro-renewable energy nongovermental organizations, members of Congress and companies with operations in Mexico who want to buy green energy.

"Practice tip No. 1: Get everyone on your side to show up at a meeting," she said.

She said it's good to draft a consultation request, but not necessary. However, clearly articulating your arguments, and how they are supported by the trade treaty is crucial.

She said they're having "a lot of conversations of what an off-ramp would look like. You have to be willing to think outside the box."

Antebi warned that waiting out the end of AMLO's term could be dangerous for American energy investors, because AMLO could try to ram through a constitutional change in his lame duck period to favor Mexico's state-owned oil producer and electric utility.

But she noted that across the board, Mexico, Canada and the U.S. are not acting as if they feel constrained by the rules.

"I do think the failure of the U.S. to comply with auto rules of origin [panel decision] is a very bad example, and sets a precedent," she said. She said that if the U.S. had changed its position as a result of the ruling, it would have given the U.S. moral authority in arguing its case with Mexico.

Sciarra said the Mexican private sector is very engaged over the denial of permits for new solar and wind installations, the revocation of permits for existing projects, and curtailments of accepting generated energy that hit foreign companies, not Mexican power plants.

"They see this whole situation as a disaster for Mexico," she said.

Antebi said that while AMLO does not care what the private sector has to say, as he sees investment coming to Mexico anyway, his successor probably will not be as nationalistic and will be more likely to recognize that growing manufacturing capacity means that the country needs more energy from all sources. So, as long as the constitution hasn't changed, she thinks the energy dispute will be able to be solved without the U.S. having to resort to retaliatory tariffs.