Introduction
The Business Roundtable (BRT) has accused Mexico of violating the provisions of the United States-Mexico-Canada Agreement (T-MEC) by providing certain priorities to the Federal Electricity Commission (CFE) and Pemex, the state-owned oil company. These measures are said to unfairly disadvantage U.S. businesses and hinder their ability to compete with Mexican state-owned enterprises.
Mexico’s Energy Sector Reforms
In 2021, Mexico amended its Electricity Industry Law to require the CFE, as the operator of the electricity grid (Cenace), to prioritize electricity generated by CFE over private competitors. In 2022, the Mexican Secretariat of Energy sent a letter to the Natural Gas National Control Center (Cenagas) demanding that users of Mexico’s natural gas transportation service prioritize supply from CFE or Pemex.
The BRT argues that these actions contradict Article 2.3 of the T-MEC’s Access to Markets Chapter, which denies “national treatment” to U.S. products, and Article 22.5.2 regarding state-owned enterprises, as Mexican state-owned companies do not exercise regulatory discretion impartially towards the companies they regulate.
Non-Tariff Barriers Implemented by Mexico
The BRT also points out that Mexico has recently introduced non-tariff barriers, including new import permits for energy products, inspections of gas stations and terminals, customs inspections, tax audits, and a fixed price for fuels. These measures make it difficult for the private sector to compete with state-owned Pemex, violating Article 22 of the T-MEC.
In the aviation sector, Mexico has implemented policies since 2022 that have reduced access for certain U.S. passenger airlines to Benito Juárez International Airport (MEX) and forced cargo airlines to abandon MEX. The BRT claims these actions were taken against U.S. interests, supposedly to allow construction at MEX, but no progress has been made three years later. As a result, some U.S. airlines face limited access to the Mexican market compared to their Mexican competitors.
In telecommunications, the Mexican spectrum pricing system requires operators to pay two separate components: an initial payment during the auction process when winning a spectrum license and an annual fee to maintain their spectrum rights during the license’s validity.
The former Mexican regulator, IFT, stated that high and discriminatory spectrum pricing has hindered competition, coverage, and investment. Mexico has one of the highest spectrum costs globally, 88-96% above international standards, making digital transformation challenging in the country.
The USTR identified these annual spectrum fees as a significant trade barrier that should be eliminated, as per Article 18.17.2 of the T-MEC. Mexico’s regulatory decisions and procedures in telecommunications, including spectrum, must be impartial towards market participants.
Consequently, the BRT argues that Mexico should reform its spectrum pricing structure to align with international standards and establish an independent telecommunications regulator to ensure U.S. companies are not disadvantaged in Mexico’s telecommunications sector.
Key Questions and Answers
- What non-tariff barriers did the Business Roundtable identify?
- New import permits for energy products
- Inspections of gas stations and terminals
- Customs inspections, tax audits
- Fixed prices for fuels
- Reduced slots for U.S. airlines
- Obligation to abandon cargo operations at Mexico City International Airport (MEX)
- High and discriminatory spectrum pricing in telecommunications
