Reuters reported that the leaders of the US, Canada and Mexico are expected to hold a summit next week, focusing on a major controversial issue of whether Mexico will violate the USMCA trade agreement by tightening state control over the energy market.
How is the dispute?
Tensions over Mexico's nationalism policies officially broke out in July, when Washington and Ottawa filed a complaint against Mexico under the new free trade agreement between the United States, Mexico and Canada (USMCA).
The complaint argues that Mexico's efforts by President Andres Manuel Lopez Obrador to change the market to support state oil company Petroleos Mexicoicanos (Pemex) and the national power company Comision Federal de Electricidad (CFE) have discriminated against US and Canadian companies.
The companies also complained that the lack of leniency is hindering their operations.
Dispute mediations have begun and although progress is stagnant, the US and Canada last year agreed to extend the process by 75 days compared to the original deadline.
According to the USMCA, if the dispute is not resolved during the consultation, a dispute panel may be summoned for arbitration.
Mexico's position
President Lopez Obrador expressed optimism, saying Mexico did not violate any laws and "nothing will happen".
The view was given after Mr. Obrador renovated the electricity market in the name of national sovereignty, prioritizing CFE over private companies in connecting power plants to the grid.
Mr. Obrador often expresses his opposition to the participation of the private and foreign sectors in the energy sector as part of efforts to eradicate corruption, arguing that previous governments have distorted the market in the direction of benefiting private capital.
President Obrador also said energy is a domestic issue and pointed to a provision he has included in the USMCA that stipulates Mexico's "irreditable" ownership of the country's oil and gas. Critics say the provision does not mention his treatment of foreign companies.
Can Mexico resolve the dispute?
Most analysts predict Mexico will lose if they ask a panel of judges to resolve the dispute. That could be very costly for Mexico, increasing the prospect of US sanctions.
Both countries have previously stressed their desire to resolve the disagreement before calling a council.
The talks slowed down after Mexico's economic minister resigned in October, and her successor eliminated several experienced trade negotiators, leaving a group of inexperienced officials in charge.
The new groups said they have made proposals that could address two of the four consultation areas and are also addressing other US concerns. But there are few clear signs of significant progress in this regard.
The proposal seems to revolve around whether the energy nationalism in the Mexican administration - who have received signals from President Lopez Obrador - are ready to make a trade-off.
What is the perfect card for Mexico?
President Lopez Obrador has made it difficult for him to back down from energy policy as a foundation during his term.
Mr. Obrador's administration also noted that Mexico's support in addressing the problem of illegal immigration tends to be more weighty in Washington due to Mexico's prominent position in US domestic politics, giving the government an unwritten leverage if not made public.
In addition, Mexico's industrial sector is integrating closely with the US economy to the point that a trade conflict could be painful for both countries at a time when the region is trying to reduce its dependence on Asia and reduce skyrocketing inflation.
However, the dispute has affected the confidence of investors in Mexico and President Lopez Obrador is seeking US help to finance solar power production in northern Mexico and attract investment in greener manufacturing, especially automobile manufacturing - a key industry.
