Canadian Trade Minister Mary Ng, right, looks on as United States Trade Representative Catherine Tay speaks during a joint news conference in Ottawa on May 5. Adrian Wyld/The Canadian Press
Canada joined forces with the United States on Wednesday in a bilateral effort to push back on what it sees as Mexico’s protectionist energy policies that violate both the spirit and the letter of North America’s new trade rules.
U.S. Trade Representative Catherine Tye said her office would seek negotiations to resolve disputes on the grounds that Mexico unfairly prioritizes its state-owned energy operations and excludes U.S. firms, including solar and wind power producers.
Hours later, Commerce Secretary Mary Ng’s office said much the same and described Mexico’s policies as contrary to the US-Mexico-Canada Agreement, known in the US as USMCA and in Canada as CUSMA.
“Canada has consistently expressed its concern about Mexico’s changing energy policy. We agree with the United States that these policies are inconsistent with Mexico’s obligations under CUSMA,” spokeswoman Alice Hansen said in a statement.
“We will join the United States in taking action by launching our own consultations under CUSMA to address these concerns while supporting the US in its challenge.”
U.S. energy producers have complained for months that Mexico provides preferential pricing and emissions standards to its two main companies: oil and gas producer Pemex and the Federal Electric Power Commission.
The 2021 changes to Mexico’s electricity laws not only keep U.S. companies out of the Mexican market, but also discourage investment in clean energy providers and prospective customers who want to buy clean energy, Tai said.
“We have tried to work constructively with the Mexican government to address these concerns, but, unfortunately, American companies continue to face unfair treatment in Mexico,” she said.
“We will seek to work with the Mexican government through these consultations to resolve these concerns to improve North American competitiveness.”
The USTR also accuses Mexico of using “delays, denials and cancellations” to thwart US access to Mexico’s energy sector, including renewables.
“To achieve our shared regional economic and development goals and climate goals, current and future supply chains need clean, reliable and affordable energy.”
The show of solidarity between Canada and the U.S. marks a centerpiece of sorts for a trade relationship that has largely been marred by disputes between the two countries since the trilateral trade agreement came into effect two years ago.
The two countries are regularly at loggerheads over how Canada uses the agreement’s rules to give U.S. dairy producers access to the supply-driven 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 also remains a longtime bone of contention between Canada and the U.S., where two senior members of Congress are urging Tye to cut a deal to ease inflationary pressures on the U.S. housing market.
Democratic Sen. Bob Menendez of New Jersey and Republican Sen. John Thune of South Dakota also want the Biden administration to provide additional tariff relief for Canadian imports.
It will “make housing and home ownership more affordable for communities across our country,” Menendez and Thune wrote Monday in a letter to Tye 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 timber trade inefficiencies would help reduce unnecessary financial pressure on the U.S. housing market,” the letter said. “We urge the US Trade Representative to prioritize a new softwood lumber agreement between America and Canada.”
In November, the Commerce Department doubled the softwood lumber tariff rate to 17.9%, but decided earlier this year to lower it to 11.64%.
Tye says the U.S. is willing to talk, but that Canada needs to address the federal tariff regime, which U.S. manufacturers say creates an uneven playing field — the core issue in the decades-long trade dispute.
Federal officials in Ottawa say that while Canada is always at the table, Tye wants a significant and fundamental change in the way the government manages Crown resources before the two sides have even sat down — something that just isn’t happening.
Ottawa imposes logging fees on timber harvested from federal and provincial lands that U.S. producers — forced to pay market prices — have long insisted are an unfair subsidy.
A panel of emissaries from the three countries gathered literally on Wednesday to mark the two-year anniversary of the trade deal’s entry into force and hailed it for providing a coherent framework and rules for what has turned out to be a tumultuous era in global trade.
“This agreement completely disproves the mistaken view by some that free trade agreements are 20th-century tools that should no longer be the focus of U.S. trade policy,” said Texas Republican Kevin Brady, who helped turn the the deal into law in 2019 as chairman of the powerful Ways and Means Committee.
Brady described Tye’s decision to rail against Mexico’s energy policies as “belated but very welcome.”
“The government in Mexico is abandoning its obligations in the energy sector,” he said. “It hurts our business and North American competitiveness, and I think it hurts Mexico’s own consumers and its environmental efforts.”
Louise Blais, a former Canadian ambassador to the United Nations, noted that the USMCA framework has led to the resolution of a number of disputes over the past two years, “some more quietly than others.”
“It provided that intangible, that thing that’s not always possible to quantify: predictability,” she said. “This makes it easier for investment flows from Europe and Asia to enter all three of our countries.”
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