Canada siding with U.S. in burgeoning CUSMA fight with Mexico over energy policies

·3 min read

WASHINGTON — Canada is backing U.S. efforts to push back against what they consider 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 says Canada supports a U.S. request for dispute resolution talks with Mexico, and also plans its own consultations.

Alice Hansen says 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 its two main 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.

"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 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."

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 write.

"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 says the U.S. is willing to talk, but that 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.

This report by The Canadian Press was first published July 20, 2022.

The Canadian Press

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting