Let's Focus on Successful USMCA Implementation
Posted July 8, 2020
As President Trump welcomes Mexican President Andrés Manuel López Obrador to the White House for their first face-to-face meeting, they will tout the landmark United States-Mexico-Canada Agreement (USMCA). The updated North American trade pact, signed in January after months of deliberation, modernizes the longstanding trilateral agreement that was a central issue in the 2016 presidential campaign.
The political importance of the agreement aside, the USMCA is a win-win for American workers, businesses and energy consumers, paving the way for sustained U.S. energy leadership and expanded economic growth. Cross-border trade with Mexico and Canada is key to strengthening the domestic energy industry, which has made the United State the world’s leading producer of oil and natural gas. Today, the U.S. counts Mexico as its number one export market for natural gas and refined products, with Canada as its top destination for crude oil.
By solidifying these critical energy partnerships, the International Trade Commission projects the USMCA could support the creation of between 176,000 and 589,000 American jobs, in addition to the 12 million US jobs and nearly $1.3 trillion in trade already sustained by our partnership with Mexico and Canada. With this record of economic development and job creation among these trading partners, it is clear why Presidents Trump and López Obrador would take a victory lap this week.
However, amidst the celebration of this historic agreement, it is important that the Trump administration also use the occasion to begin to focus on implementation and how to address troubling developments in Mexico that contradict the investment protections provided by USMCA and threaten the agreement’s economic benefits.
Several recent actions taken by the Mexican government are harmful to U.S. investors, violate commitments made by Mexico and undermine the framework of the USMCA. For example, U.S. entities are facing discrimination as foreign investors in the permitting processes for a range of projects in Mexico, including new or rebranded gas stations, third party storage facilities, imported fuels, liquids terminals, and liquefied natural gas terminals.
American investors are now experiencing approval delays for routine permits that should be granted within 90 days under Mexican law. Mexican officials have begun shutting down pumps at U.S.-owned gas stations for minor or non-existent infractions, at times with the coercive presence of Mexico’s National Guard. Additionally, a new requirement that took effect on July 1 forces American energy companies to keep five days’ worth of fuel storage. Such a mandate is problematic, as the Mexican state-owned petroleum company, PEMEX, owns and operates most of the available storage capacity and the Mexican government continues to block American companies from building new storage facilities.
As North American energy markets become more interdependent, and U.S. energy firms compete successfully for market share in Mexico, it is critical that Presidents Trump and López Obrador address these lingering issues. If the USMCA is to improve trilateral trade relations in North America, the Mexican government must apply regulations fairly and consistently to all companies in its market to establish free flowing energy, not discriminating against U.S. firms.
A hallmark of the USMCA is its insistence on fairness and reduced trade barriers. Businesses, agricultural groups, and organized labor supported the USMCA because it guarantees that workers will be treated fairly across North America. Unfortunately, given Mexico’s actions toward U.S. energy firms, those promises could unravel without further diplomatic engagement.
U.S. Secretary of Energy Dan Brouillette recently explained that the USMCA will make Americans “freer, safer, and more prosperous,” a notion we should welcome, especially in these uncertain economic times. As President Trump and President López Obrador celebrate the implementation of USMCA, it is important to remember that the full promise of this landmark agreement will only be realized if our North American leaders cooperate to protect free, fair, and open trade.
- This article also appeared on Real Clear Energy.
About The Author
Frank Macchiarola became API senior vice president of policy, economics and regulatory affairs in 2019 after previously serving as vice president of downstream and industry operations since 2016. Macchiarola came to API from America’s Natural Gas Alliance, where he was the organization’s executive vice president. A Capitol Hill veteran, he held several senior staff positions in the U.S. Senate including with the Committee on Energy and Natural Resources and the Health Education Labor and Pensions Committee. Macchiarola is a graduate of the College of Holy Cross and earned his J.D. from New York University School of Law.