Mexico puts in check Trade Agreement of 645 thousand million dollars

Mexico puts in check Trade Agreement of 645 thousand million dollars
Mexico puts in check Trade Agreement of 645 thousand million dollars

Mexico’s possible breach of the rules of the Mexico, United States and Canada Treaty (T-MEC) for the energy sector, puts in check the commercial relationship with neighboring countries to the north on an agreement that generated a value of 645 billion dollars, or 13 billion pesos throughout 2021.

The figure represents almost double the budget allocated to Mexico during 2022, and also equals 65 percent of the value generated by the national economy each year on average, or 6.5 times Pemex’s total debt, approximately.

Last July, the United States and Canada denounced changes in Mexican energy policy, promoted by President Andrés Manuel López Obrador, which favor Petróleos Mexicanos (Pemex) and the Federal Electricity Commission (CFE) and displace private companies, a fact that violates the principles of non-discriminatory treatment and investment protection.

We tell you: Chapter on energy of the T-MEC will not serve as a shield for Mexico, they warn

The controversy opens the door to a trilateral discussion in which Mexico could be sanctioned with tariffs, but which also calls into question the country’s reputation as a trading partner.

It should be remembered that the T-MEC is one of the most important trade agreements in the world, along with that of the European Union that brings together 27 nations, that of the Asia-Pacific Economic Cooperation Forum that brings together 21 countries, in addition to the Comprehensive Treaty and Progressive Trans-Pacific Partnership (CPTPP) that integrates 11 nations.

This has an important area of ​​influence, since it allows the free flow of products and services with tariff benefits for a population of 373.5 million people.

Mexico, the big winner

As a member of the T-MEC, the Mexican nation obtains important benefits: only last year, exports to the T-MEC region amounted to 413 billion dollars, according to statistics from the Ministry of Economy (SE); That means that 64 of every 100 dollars that were generated within the Agreement, are the result of the sale of Mexican products and services.

This situation allows Mexico to generate a favorable trade balance, so much so that in 2021 it achieved a surplus of 180.2 billion dollarsan amount that is equivalent to financing 18 projects such as the Olmeca refinery that the federal government is building in Dos Bocas, Tabasco.

In fact, the country has accumulated 21 consecutive years of trade surplus, which positions it as the main exporter of the agreement.

“The T-MEC has been very important for the country; the arm that has helped us in recent crises is the reactivation of the export sector”, said Ildefonso Guajardo, former Secretary of Economy and who led the renegotiation of the Treaty.

Likewise, Foreign Direct Investment (FDI) related to the international agreement in Mexico adds 355 thousand 198.7 million dollarsequivalent to 53.9 percent of the total FDI received, indicate data from the same SE.

There are currently 36,058 companies in the national territory with investment derived from the TMEC, however, this situation has also made Mexico dependent on the Treaty, since eight out of 10 national export products and services are sold in the region that is the subject of the agreement. .

“Any change or commercial tension with respect to the Agreement, could affect the Mexican economy considerably”he pointed Gabriela Siller, director of analysis at Banco Base.

The conflict

The dispute began on July 19 when the United States accused Mexico of not respecting the Treaty’s rules on energy matters; Canada joined the claim a day later.

The disagreement of both countries opened a consultation period that could lead to the installation of a panel of experts, who could sanction the Mexican government.

“We have repeatedly expressed serious concerns about a series of changes in Mexico’s energy policies, and their consistency with commitments under the T-MEC,” said Katherine Tai, US trade representative at the time.

Mexico’s international partners consider that the federal government has failed to comply with Chapter 2 of the T-MEC on “Market Access”, specifically articles 2.3 and 2.11 related to national treatment and on the restriction of imports and exports, respectively.

It might interest you: Mexico would pay up to 30 billion dollars for violating T-MEC obligations

At the same time, it would be contravening the provisions of Chapter 14 on “Investment” in its section 14.4 regarding national treatment, as well as Chapter 22 dedicated to “State-Owned Companies”, in section 22.5 that establishes that the regulators of the sector must proceed impartially.

For specialists, Mexico’s energy policy does not justify violations of a Treaty that has the status of law.

“Mexico can change its laws in the energy sector as long as it complies with the Treaty’s commitments. What is not valid is to return two years later and violate what was agreed, and try to impose a model of state control whose failure has already been demonstrated”, considered Kenneth Smith Ramos, former leader of the Treaty negotiator.

High risk

For experts on the subject…

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