The North American Agenda: What Lies Ahead for the USMCA? – New Issues Arise and the Old Ones Remain

“I take this opportunity to say it, we are not going to allow GMO corn. Mexico is the country of corn, corn arose here, like cocoa, and we have many varieties of native corn, and what we have to do is improve those varieties and not choose to import GMO corn.”

– Mexican President Andrés Manuel López Obrador (AMLO)

Additional Trouble Brewing Over Corn

On November 14, Iowa Senators Chuck Grassley and Joni Ernst sent a letter to the U.S. Trade Representative requesting the initiation of a separate consultation process under the USMCA due to Mexico’s proposed ban on the import of genetically modified corn (GMO corn). This move follows similar calls by farmers and Secretary of Agriculture Tom Vilsack, after an industry-funded report found that the ban would mean a loss of $13.61 billion for the U.S. corn industry over the next ten years. The USMCA states that sanitary and phytosanitary measures are to be based on “relevant scientific principles” and “not applied in a manner that constitutes a disguised restriction on trade.”

• Diving deeper: The López Obrador government published a decree in 2020 phasing out the use of GMO corn as a source of food by January 2024, as well as the import and use of the herbicide glyphosate. The president recently confirmed the decision, which may also include a ban on GMO corn-based livestock feed. This would cut Mexican corn imports from the United States in half. Although Mexico has said that it would seek to buy non-GMO corn from large producers while it works to increase domestic production, this supply is largely already accounted for in the coming years. Experiences from other countries and already-high inflation among food products should deter sudden changes to established food and agriculture patterns.
• Our takeaway: This issue is creating political waves on all sides of the trilateral relationship. In the United States, the agricultural sector is key to both parties and Iowa plays an outsized role in presidential primary elections. In Canada, Trade Minister Mary Ng has also expressed concern over the measures. In Mexico itself, members of the president’s own party recognize the importance of farming and have sought to delay the ban, even proposing counter legislation.

Mixed Messaging and Unresolved Concerns

In a hearing before the Mexican Congress, Secretary of the Economy Raquel Buenrostro blamed past leadership’s incomplete response to U.S. concerns for the extension of the trilateral consultations under the USMCA, while also restating that Mexico’s Electricity Industry Law (LIE) does not violate the treaty. Her argument for the later hinged upon the fact that the 2021 version of the LIE promoted by AMLO – which seeks to change Mexico’s dispatch order to favor CFE, among other uncompetitive measures – is currently paused in courts, thus leaving in place the 2014 law passed by the previous administration.

• Diving deeper: If the United States and Canada were to agree with this argument, it would resolve one of their primary concerns related to Mexico’s energy policies. However, in reality, the future of the 2021 LIE is still being decided within the judicial branch. The Supreme Court recently elected to allow lower courts to begin ruling on individual injunctions put forth by companies.
• Our takeaway: The Government of Mexico has not given up on defending its energy policies before domestic courts. This week, it officially submitted its response to the Supreme Court’s decision to suspend a June decree forcing select companies to buy natural gas from CFE and Pemex, doubling down on an issue also singled by the USTR. Court Ministers discarded the counterclaim.

Contradictions at the COP

In the context of climate COP27 in Egypt, Mexico updated its Nationally Determined Contributions (NDCs) under the Paris Agreement for the first time since 2015. These included increasing the country’s greenhouse gas reduction commitments from 22% to 35% by 2030, investing $48 billion in the transition, reducing soot emissions by 52 million tons, and doubling the country’s current clean energy generation by 2030. Analysts described the goals as non-specific, unrealistic, and contradictory to AMLO’s climate strategy thus far.

• Diving deeper: Setting ambitious objectives can be an important step towards action. They can also serve to diffuse international scrutiny of a country’s climate record. U.S. Special Climate Envoy John Kerry was present for Mexico’s announcement, lauding his neighbor’s “increasingly ambitious commitments.”
• Our takeaway: Luiz Inacio Lula da Silva, Brazil’s president-elect, was received as a rock star at COP27, seizing control of the region’s environmental agenda even before taking office. AMLO has never attended a COP and also declined to travel to Bali for the G20 meeting this week, making him, Vladimir Putin, and Jair Bolsonaro the only leaders to skip the event. Brazil will chair the G20 in 2024 and has offered to host the COP in 2025.

Following the Conversation

• “We are not violating anything, we are simply caring for how the electrical system operates, and it seems shameful to me that they are, they are asking them to come, that the Republicans are coming now […] it is a shame that the Mexicans are asking foreigners to come here to set their rules for us,” said CFE General Director Manuel Bartlett in regards to a potential panel under the USMCA over Mexico’s energy policies.
• “These goals will enable the North American region to have one of the most efficient energy transitions […] The decision of President López Obrador will lead to millions of new jobs and the expansion of Mexico’s green economy,” stated Foreign Secretary Marcelo Ebrard when presenting Mexico’s new goals at COP27.
• “It is the time to deal with the moments in which we are worried and using this mechanism and I am sure that we will arrive at a result that is satisfactory for all of us,” highlighted U.S. Deputy Secretary of State Wendy Sherman regarding the ongoing trilateral consultations over Mexico’s energy policies under the USMCA.

All translations provided by FTI Consulting.

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