(CNN Spanish) – Three years ago, the T-MEC went into effect, a new trade agreement between Mexico, the United States and Canada that is today at the center of the dispute after Washington and Ottawa began a consultation process to resolve existing differences over energy. The policies of the government of Andrés Manuel Lopez Obrador. But what does this treaty consist of (and what do the three countries trade)?
What is USMCA?
T-MEC is an updated version of the North American Free Trade Agreement (NAFTA), implemented in 1994 that changed the economies of the three countries by eliminating export tariffs.
T-MEC went into effect on July 1, 2020, months before Lopez Obrador took office as President of Mexico. Its renewal was suggested as campaign promises by then US President Donald Trump, who claimed it was “the worst trade deal ever reached”. After months of negotiations between the three governments, including Mexico’s president-elect transition team, the agreement was finally announced in 2018. But it was approved until 2020 in the US Congress after Democrats added stronger working rules.
It is a treaty that promotes investment, free trade, job creation and the development of countries. It is expected to create 176,000 jobs after six years and increase US GDP by 0.35%, according to a report published in 2019, long before the pandemic, by the US International Trade Commission.
What do Mexico, the United States, and Canada trade?
The trade exchange between Mexico, the United States and Canada is closely interconnected. 83.48% of Mexican exports go to Canada or the United States, According to the Mexican Economy Minister,Products ranging from cars to flat screen televisions and data processors.
While more than 45.99% of Mexico’s imports come from both countries, according to the Government of Mexico. The country imports gasoline, corn and other products.
Among the main products exported by Mexico under the T-MEC in 2021 are the following, according to a report by the Ministry of Economy:
- data processing machines
- passenger cars
- Vehicles for transporting goods
- Vehicle parts and accessories
Among the main products imported by Mexico under the T-MEC in 2021 are:
- Petroleum oils except crude
- Petroleum gases and gaseous hydrocarbons
- Vehicle parts and accessories
- diesel engines
AMLO energy policy, in dispute
The United States began a consultation process this week under the T-MEC, arguing that the energy policies of the Lopez Obrador government are harming US companies by restricting them by giving preference to state-owned enterprises and not complying with the terms of the trade agreement. Canada joined hours later and also requested this consultation process.
“The consultations relate to certain actions in Mexico that harm US companies and energy produced in the United States for the benefit of Mexico’s State Electricity Corporation, the Federal Electricity Commission (CFE), and the state oil and gas company, Petróleos Mexicanos,” US Trade Representative Catherine Tay said in a statement.
The US announcement is not surprising given that they have been warning for more than a year about their concerns about changes in energy matters implemented by Lopez Obrador’s government.
In January 2021, the US secretaries of state, trade, and energy sent a letter to their Mexican counterparts condemning regulators for “banning permits for private energy projects.” A year later, in January 2022, the US Senate Finance Committee sent Mexico a letter condemning the suspension of import permits for more than 80 US energy companies.
“We have repeatedly expressed serious concerns about a series of changes in Mexican energy policies and their consistency with the commitments made by Mexico under the T-MEC,” Tay said when announcing the consultations.
With information from CNN’s Katie Lobosco