NAFTA Modernized in the Right Way Would Boost U.S. Economic, Security Interests
Posted February 21, 2018
With negotiations to modernize the North American Free Trade Agreement (NAFTA) headed for a seventh round, let’s underscore what we’ve said to U.S. negotiators since the start of talks last year: While we support attempts to modernize NAFTA, negotiators must not harm key NAFTA provisions that have strengthened the United States’ – and North America’s – energy position for decades.
NAFTA helps secure and maintain energy market access for the U.S. in Mexico and Canada and is the right path for our country’s economic and national security interests. The agreement helps support more than 10 million U.S. jobs, provides affordable and reliable energy for U.S. consumers and increases the competitiveness of U.S. companies operating and investing in Canada and Mexico. All of these points argue strongly for keeping NAFTA at work in support of U.S. energy. API Chief Economist Dean Foreman writes:
“[T]he U.S. was unquestionably in a stronger energy trade position in 2017 than it was 10 years ago. Energy trade with our NAFTA partners Canada and Mexico has made our country more energy secure while helping to reduce imports from other parts of the world. Free trade agreements like NAFTA play an important role in delivering these benefits and others.”
NAFTA provisions – including zero tariffs on exchanged goods, market access and trade liberalization – have helped foster economic growth, generate consumer benefits and increase U.S. energy security.
Critically important in the ongoing talks is to retain NAFTA’s Investor State Dispute Settlement (ISDS) provision. ISDS protects U.S. investors, including energy companies, from unfair treatment and asset seizure by host countries, which also safeguards U.S. direct foreign investment. Weakening or eliminating ISDS, by modifying it or by the U.S. withdrawing from NAFTA, will take the U.S. in the wrong direction and risk undermining U.S. global energy leadership.
Here’s another important point: If the United States remains in NAFTA and modernizes it in the right way for American industries, U.S. national security can be enhanced by strengthening U.S. competitiveness in Mexico’s energy market, which recently was opened to foreign investors for the first time in more than 70 years. This is particularly important, as Russia and China also want access in the Mexican energy market and may use the opportunity to undermine our current role as global energy leaders. China’s state-owned oil company CNOOC already won a deepwater block in Mexico that is right on the U.S.-Mexico border in the Gulf of Mexico.
Mexico is now the No. 1 export market for U.S. pipeline natural gas, total refined products, finished motor gasoline, distillate fuel oil, rubber and plastics. The U.S. exported 21 percent of its total global exports of refined products and natural gas to Mexico in 2015. U.S. pipeline capacity for natural gas exports to Mexico has rapidly expanded to 7.3 billion cubic feet per day and is expected to nearly double in the next three years. Mexico also is a new market for U.S. liquefied natural gas exports.
Since 2000, Mexico’s net imports of gasoline and diesel have tripled – most of it supplied by U.S. refineries. Mexico’s six refineries cannot meet the country’s increased demand for fuels – and the U.S. is in a prime position to continue to supply Mexico to meet the growing need. In fact, U.S. Gulf Coast refineries are more efficient than Mexico’s refineries and are more ideally suited to process Mexican crude oil and re-export the refined products back to Mexico. This represents tremendous opportunity for the United States’ modern, sophisticated refinery sector, helped by provisions in NAFTA.
If the U.S. withdraws from NAFTA or weakens it, other nations could seize this opportunity. China and Russia could increase their presence in the Mexican energy market, right on our southern border. Instead of support for U.S. jobs from U.S. investments in and energy trade with our neighbor, Mexico could turn to others.
The national security risk is that Mexico could become another Venezuela, which from 1999 to 2018 nationalized many U.S. and U.S.-allied energy assets, awarded project stakes to Russian and Chinese oil and natural gas companies over U.S. companies and took cash-for-oil loans from Russian and China.
We shouldn’t risk our energy and national security, when we have an easy win right in front of us.
About The Author
Mark Green joined API after a career in newspaper journalism, including 16 years as national editorial writer for The Oklahoman in the paper’s Washington bureau. Previously, Mark was a reporter, copy editor and sports editor at an assortment of newspapers. He earned his journalism degree from the University of Oklahoma and master’s in journalism and public affairs from American University. He and his wife Pamela have two grown children and five grandchildren.
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