Politics

Ottawa siding with U.S. in trade pact fight over Mexican energy policies

Canada is backing U.S. efforts to push back against what they see as protectionist energy policies in Mexico that violate North American trade rules.

Canada says Mexico's energy policies are 'inconsistent' with its CUSMA obligations

Trade Minister Mary Ng, right, alongside her United States counterpart Katherine Tai during a joint news conference in Ottawa on Thursday, May 5, 2022. (Adrian Wyld/The Canadian Press)

Canada is backing U.S. efforts to push back against what they see as protectionist energy policies in Mexico that violate North American trade rules.

U.S. Trade Representative Katherine Tai says Mexico is unfairly prioritizing its own state-owned energy operations and shutting out American firms, including solar and wind producers.

A spokesperson for Trade Minister Mary Ng said Canada supports a U.S. request for dispute resolution talks with Mexico, and also plans its own consultations.

Alice Hansen said Canada agrees that Mexico's policies are inconsistent with its obligations under the U.S.-Mexico-Canada Agreement, referred to in Canada as CUSMA.

U.S. energy producers have been complaining for months that Mexico provides preferential pricing and emissions standards for two of its largest companies: oil and gas producer Pemex and the Federal Electricity Commission.

The USTR is accusing Mexico of using "delays, denials and revocations" to thwart U.S. access to Mexico's energy sector, including on renewable energy.

A Pemex tanker truck is seen parked outside a storage facility operated by Mexico's state-owned oil company on Dec. 30, 2016. U.S. officials say Mexico has given preferential pricing and emissions standards to two of its public companies. (Felix Marquez)/The Associated Press)

"Canada has consistently raised its concerns regarding Mexico's change in energy policy. We agree with the United States that these policies are inconsistent with Mexico's CUSMA obligations," Hansen said in a media statement.

"We will be joining the United States in taking action by launching our own consultations under CUSMA to address these concerns, while supporting the U.S. in their challenge."

Ottawa and Washington have clashed over trade issues

The show of Canada-U.S. solidarity marks a pivot of sorts for a trade relationship that has largely been marked by disputes since the trilateral trade agreement became law two years ago.

The two countries have been regularly at odds over how Canada uses the agreement's rules to provide U.S. dairy producers access to the supply-managed market north of the border. And the Biden administration only agreed earlier this month to lift Trump-era tariffs on Canadian-made solar products imposed back in 2018.

Softwood lumber, too, remains a long-standing bone of contention between Canada and the U.S., where two senior members of Congress are urging Tai to make a deal to ease the inflationary pressure on the U.S. housing market.

Democrat Sen. Bob Menendez of New Jersey and South Dakota Republican Sen. John Thune also want the Biden administration to provide further tariff relief on imports from Canada.

Doing so would "make home construction and homeownership more affordable for communities across our country," Menendez and Thune wrote Monday in a letter to Tai and Commerce Secretary Gina Raimondo.

Since the last softwood lumber agreement between the two countries expired in 2015, softwood lumber prices have more than doubled, they wrote.

"Addressing lumber trade inefficiencies would help reduce unnecessary financial pressures on the U.S. housing market," the letter reads. "We urge the U.S. trade representative to prioritize a new softwood lumber agreement between America and Canada."

In November, the Department of Commerce doubled the softwood lumber tariff rate to 17.9 per cent, but decided earlier this year to lower it to 11.64 per cent.

Tai said the U.S. is willing to talk but Canada must address the federal fee regime that American producers say creates an uneven playing field — the core issue in a trade dispute that has persisted for decades.

Ottawa sets stumpage fees for lumber harvested from federal and provincial land that producers in the U.S. — forced to pay market rates — have long insisted amount to an unfair subsidy.

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