Energy Is A Breaking Point In NAFTA Deal
Oil and gas is proving to be a sticking point in the NAFTA renegotiations, with the incoming Mexican president hoping to exclude the chapter on energy from the trade deal.
To be sure there have been a series of issues that have divided the three countries. Many of them have been resolved but even at this late date some outstanding issues remain. The U.S. and Mexico are close to hammering out their differences on cars, which would allow Canada to rejoin the talks. The three countries have not agreed on dispute resolution mechanisms, and the U.S. wants the deal to sunset every five years, which would require them to periodically renew the trade pact, a provision that Canada and Mexico oppose because it would create uncertainty.
But oil and gas are also shaping up to be a point of tension, which is an unexpected development. Incoming President Andres Manuel Lopez Obrador (often referred to as AMLO), who takes office in December, opposes the energy chapter in NAFTA, even as the current administration supports it, according to the Wall Street Journal. Energy was not included in the original NAFTA deal ratified in the 1990s because Mexico’s energy sector was under state control. That changed in 2013-2014 when President Enrique Pena Nieto succeeded in ending seven decades of government monopoly. Related: The Next Major Challenge For Norway’s Oil Industry
AMLO was opposed to those energy reforms when they passed, and while he has since softened his stance on the partial-privatization of oil, gas and electricity, his team is holding up the NAFTA negotiations over energy. “The energy sector was on the table, but it wasn’t a matter of concern. It was rather a technical issue on how to reflect Mexico’s overhaul in the treaty,” Carlos Véjar, a trade attorney at law firm Holland & Knight in Mexico City, told the Wall Street Journal.
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