NAFTA Supplies America with Energy and Power
The Trump Administration unveiled an agenda for “energy dominance” shortly after taking office, promising to curb the global influence of countries like Russia and China with American energy exports.
Whether or not the administration succeeds will depend a great deal on ongoing trade talks with Canada and Mexico. U.S. negotiators continue to negotiate terms to modernize the North American Free Trade Agreement, the trade pact between the U.S., Mexico and Canada.
NAFTA has fostered a thriving North American energy market that currently supports millions of U.S. jobs and keeps costs down for American consumers. If negotiators agree to eliminate or weaken NAFTA’s Investor-State Dispute Settlement, we would open the door for Chinese and Russian energy interests to exert their influence right here in North America.
That’s a national security outcome that no proponent of U.S. “energy dominance” would understand or support.
NAFTA eliminated tariffs on several oil and natural gas products between the United States, Canada and Mexico. In so doing, it has enabled each of our nations to benefit from one another’s considerable energy resources and technical capacities.
Consider America’s relationship with Mexico. The United States is a net importer of crude oil from Mexico. Yet much of that product is refined in American facilities and exported back to Mexico. In fact, Mexico receives roughly a fifth of all refined petroleum product exports from the United States.
Our southern neighbor is also a significant and growing importer of American natural gas, accounting for a whopping 60.2 percent of America’s natural gas exports. Meanwhile, Canada accounts for 61 percent of America’s crude oil exports and approximately a third of natural gas exports.
This economic relationship has been enormously beneficial for Americans. The U.S. Chamber of Commerce recently estimated that trade with Canada and Mexico supports nearly 14 million American jobs.
NAFTA has also helped to create a built-in advantage for the U.S. to access Mexico’s newly opened energy market. US companies won 15 percent of the 47 blocks awarded to foreign investors since 2015, while companies from Russia and China combined won 13 percent of these blocks.
This could change quickly if NAFTA falls apart. By 2030, America’s diminished role in Mexico’s energy economy could force that nation to rely more on investment from Russia and China.
That’s precisely what happened after America ceased to be the biggest investor in Venezuela’s oil sector. Within a few years, China and Russia had swooped in, loaning the nation $60 billion to strengthen its energy industry.
In a post-NAFTA world, Mexico could easily shift to using funds from Russia and China to dramatically increase its own production and refining capacity, and making it less reliant on the United States as a result.
Fortunately, U.S. trade representatives can avoid that scenario by ensuring that NAFTA is not only preserved, but strengthened. Ideally, a renegotiated trade pact would maintain an open energy market between the United States, Mexico and Canada by making NAFTA permanent and strengthening ISDS.
Today’s vibrant, integrated North American energy market has served Americans well for years, while also keeping our nation’s global energy rivals at bay. Failing to preserve NAFTA would leave America less prosperous, less secure and less influential around the world.
Kyle Isakower is the vice president for regulatory and economic policy at the American Petroleum Institute. Based in Washington, D.C., it is the largest U.S. trade association for the oil and natural gas industry.
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