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Electricity Industry Law violates T-MEC: US

Provisions in Mexico‘s Electricity Industry Law violate the Treaty between Mexico, the United States and Canada (USMCA), argued the US government.

This assertion was included by the White House Trade Representation (USTR) in its request for consultations to raise a dispute settlement panel under the USMCA.

In March 2021, Mexico amended its Electricity Industry Law to require its grid operator, the National Energy Control Center (Cenace), to give priority in various ways to electricity produced by the Federal Electricity Commission (CFE) over private competitors in dispatching electricity to Mexico’s grid.

This prioritization is carried out through a series of provisions, operating separately or together, including:

  • Article 26, which requires Cenace to prioritize the dispatch of energy generated by plants “owned by state agencies, entities or companies.”
  • Article 4 (VI), which “guarantees, in the first instance” electricity contracts of a type that only CFE may have or enter into.
  • Also articles 101 and 108 (V), which ask Cenace to “determine the allocation and dispatch” of electricity based on broad and undefined criteria.

Electricity Industry

The Electric Industry Law, as amended, is reflected in legal instruments that include the following, operating separately or jointly:

  • Draft initiative of decree reforming various provisions of the Electricity Industry Law and adding others.
  • Decree amending and adding various provisions of the Electricity Industry Law (March 9, 2021)3 and its implementing regulations.
  • Decision of the Supreme Court of Justice of the Nation announced on April 7, 2022 in the Unconstitutionality Action 64/2021 and all votes.

According to USTR, this measure appears to be inconsistent with several provisions of the USMCA.

First, the measure appears to be inconsistent with Article 2.3 of the USMCA because Mexico has not granted national treatment to U.S. goods under Article III of the General Agreement on Tariffs and Trade 1994 (GATT 1994).

Second, the measure appears to be inconsistent with Article 14.4 of the USMCA because Mexico has not accorded U.S. investors and their investments treatment no less favorable than that which it accords, in like circumstances, to Mexican investors and their investments.

 

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