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US Rejects Extension of USMCA in Current Form, Opens New Trade Talks

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The Trump administration on Wednesday decided not to renew the US-Mexico-Canada Agreement in its current form, instead opting to conduct annual reviews of the trade agreement.

Though the agreement remains in force pending further negotiations or potential termination, Washington's refusal to grant a formal renewal signals a push for fundamental structural changes to the deal.

"The United States will continue to engage with Mexico and Canada to address the agreement's shortcomings and our trade deficits with these countries," US Trade Representative Ambassador Jamieson Greer said.

"However, the agreement remains in force pending resolution of these issues or until the agreement's termination," said Greer.

Although the USMCA does not contain a dedicated energy chapter, it includes several provisions impacting the sector.

This includes rules on investment, state-owned enterprises, regulatory transparency, and recognition of Mexico's sovereignty over its hydrocarbon resources. Chapter 8 of the USMCA treaty is titled "Recognition of Mexican Ownership of Hydrocarbons."

In addition, the US and Canada signed a bilateral side letter in 2018 on energy regulatory measures and transparency, which forms an integral part of the agreement. The letter stated that the US and Canada have agreed on disciplines related to energy regulatory measures and energy regulatory transparency.

The latest decision highlights long-standing friction between the US and its southern neighbor, particularly regarding Mexico's energy sector.

In 2022, the US challenged Mexican energy policies, alleging that Mexico has systematically prioritized state-owned utilities, Comision Federal de Electricidad and Petroleos Mexicanos, at the expense of US private sector investment.

US officials have long contended that amendments to Mexico's Electric Power Industry Law, along with the denial of permits for wind and solar projects, violate commitments made under the USMCA's market access and state-owned enterprise chapters.

The US argues that these policies not only disadvantage American firms but also stifle investment in renewable infrastructure.

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