Energy Topics for NAFTA Renegotiation

Energy Topics for NAFTA Renegotiation: What President Trump’s negotiators might propose

HOUSTON — We have not yet heard from the Trump Administration regarding what topics, if any, there might be of concern in relation to energy in the upcoming NAFTA renegotiations; the list of 16 topics in Table 1 reflects concerns heard in Houston and Mexico regarding the oil and power regimes that were put in place over the course of the Energy Reform of 2013-15.

We do see the opportunity for U.S. negotiators to raise concerns under the headings of Equal Treatment Under the Law and Unfair Restriction of Economic Opportunity; but we doubt that they will do so in fact. President’s Trump’s voiced concerns have been about trade balances, not about the economic consequences of law or policy.

That said, there is a strong case to be made that private investors are not equal under the law compared to agencies of the Mexican State that operate as commercial enterprises. The remedy for this situation is to create a second national power company and a second national oil company, each with professional management and private shareholders in an equity structure in the fashion of Statoil (where the Norwegian State owns 2/3rds of the shares).

The remedy for other concerns is not obvious: the dominant role of PMI in the supply of imported petroleum products, for example. The Energy Reform calls for the free imports of petroleum products, but, so far, the market dominance of Pemex-PMI makes that outcome uncertain.

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Written by

Mexico Energy Intelligence

Baker & Associates offers niche-market business and policy intelligence related to Mexico's oil and gas, power and chemical industries. Over 1,000 reports have been issued in the last 20 years. Subject matter expert and publisher George Baker, who directs the firm, has carried out consulting assignments starting in the late 1970s at the height of the Oil Boom in Mexico. He brings bilingual and bicultural skill-sets to understanding and responding to challenges of business and public policy, coupled with a deep familiarity with the history and idiosyncrasies of the Mexican operating environment.