US officials meeting with President Andres Manuel Lopez Obrador and his cabinet plan to send the message that Mexico’s climate and energy policies are preventing the countries from collaborating fully.

President Joe Biden’s administration sees Mexico as an opportunity for companies to move supply chains closer to the US to avoid a repeat of pandemic-era logistics snarls, according to a US official, who asked not to be identified because the discussions are private. But the country risks missing out because many of AMLO’s energy policies -- including for clean energy -- prevent or dissuade investment, the person said.

Secretary of State Antony Blinken and Commerce Secretary Gina Raimondo arrived in Mexico City on Monday for the annual High-Level Economic Dialogue. They’re meeting the president, known as AMLO, as well as his top economic, financial and foreign-policy aides.  

Alignment on climate and energy will enable both countries to reap the benefits of recently passed US economic packages such as the Inflation Reduction Act and Chips Act, the official said. 

Along with the IRA -- which featured $370 billion in tax incentives and other programs to help fight climate change -- Congress has passed two other economic packages over the past year. The Bipartisan Infrastructure Law added $550 billion over roughly five years, and the CHIPS Act had $52.7 billion in aid for semiconductors.

The US Trade Representative in July requested consultations over AMLO’s energy policy, which privileges state-owned oil producer Petroleos Mexicanos and the electricity provider known as CFE. The agency says this violates the 2020 US-Mexico-Canada agreement on trade known as USMCA, the successor to the two-decade-old Nafta. Canada filed a similar request for talks over Mexico’s electricity policy.

Lopez Obrador denies that his policies violate the pact, saying that the US needs to respect Mexico’s sovereignty. The countries began talks over the issue last month.

While Monday’s dialogue isn’t meant to be the forum for resolving the energy dispute, it’s the overarching issue hanging over the economic relationship. If they can’t resolve their differences via consultations, it could go to a dispute panel that could allow the US to impose tariffs on billions of dollars of Mexican exports.

The US respects Mexico’s sovereignty and doesn’t see its request for consultations as challenging that, the US official said. Consultations are built into the USMCA to work through areas of disagreement, and Mexico has used that same process for its concerns with US policies, including on rules for the production of cars.