By Dave Graham
MEXICO CITY (Reuters) -Mexico on Monday voiced hope it could work out a major dispute with the United States over energy policy as it welcomed a top U.S. delegation and President Andres Manuel Lopez Obrador struck a conciliatory note in the critical stand-off.
Lopez Obrador was speaking before he met with U.S. officials led by Secretary of State Antony Blinken, visiting to mark the annual so-called High-Level Economic Dialogue (HLED), which both sides hailed as a pathway toward deepening economic ties.
The energy row broke in July, when the U.S. government demanded dispute settlement talks, arguing Lopez Obrador's drive to tighten state control of the energy market was unfair to U.S. companies and likely breached a regional trade deal.
The energy complaint, which Canada immediately joined, is arguably the biggest dispute to surface under the United States-Mexico-Canada Agreement (USMCA) since the North American trade deal came into effect in 2020. If unresolved, it could lead to the imposition of hefty trade tariffs against Mexico.
Officials said the dispute was not central to Monday's talks, though Mexican Foreign Minister Marcelo Ebrard expressed optimism that a deal could be hashed out.
"That wasn't the purpose of the meeting, because as we know that's in a process of dialogue and I would hope that an agreement will be reached at some point," Ebrard told a news conference with Blinken and others following the talks.
Mexican Economy Minister Tatiana Clouthier, who oversees trade in Latin America's no. 2 economy, underlined the point, saying the two governments would work toward a fix.
Lopez Obrador, who has made his energy policy a matter of national sovereignty, had previously responded defiantly to the United States, saying he would defend Mexico's position at an independence day military parade taking place this Friday.
However, on Monday he said he would no longer talk about the energy dispute during his Friday speech because U.S. President Joe Biden had responded to his concerns positively.
"There's a different tone. There's a respectful attitude. Rather, it's a reaffirmation of respect for our national sovereignty," Lopez Obrador told a news conference, referring to a letter he said had received from Biden.
After meeting with the U.S. officials, Lopez Obrador said on Twitter he had a "productive and friendly" meeting with Blinken and U.S. Commerce Secretary Gina Raimondo.
Blinken and the Mexican president spoke about joint efforts to tackle climate change by investing in clean energy and areas like electric vehicles, solar power, and semiconductor output, U.S. State Department spokesperson Ned Price said.
The United States and Mexico also said they would work together on a pilot project to determine the feasibility of near-shoring semiconductor manufacturing inputs in a joint statement later in the day.
The two countries boast one of the world's largest trading relationships, and officials said the efforts to modernize their economies would boost growth and jobs.
U.S. Commerce Secretary Raimondo said the United States and Mexico have identified areas of collaboration on supply chains. She saw great potential for Mexico not just in manufacturing of semiconductors but also their testing, packaging and assembly.
"The best is yet to come," said Raimondo, who declared she was "thrilled" with progress the two sides had made on a range of issues, including bolstering energy security.
Still, while observing the two sides did not discuss the energy controversy "extensively", Raimondo said businesses wanted "predictability, fairness and transparency" in an apparent nod to companies' concerns about Mexico's policies.
(Reporting by Dave Graham; Additional reporting by Anthony Esposito and Kylie Madry in Mexico City and Simon Lewis in Washington; Editing by Howard Goller, Aurora Ellis and Michael Perry)