Leaving NAFTA: Will it Undermine Trump’s Energy Policy?
The United States became a net exporter of natural gas for the first time since in at least 60 years, according to Bloomberg News reports. Last year, the US Energy Information Administration (EIA) projected the United States could become an overall net energy exporter by 2026.
President Donald Trump, with his “energy dominance” policy, would like that to happen sooner. But his threats to pull out of the North American Free Trade Agreement—if he actually acts on it—could undermine his own agenda.
According to Victoria Zaretskaya, a natural gas forecasting export at EIA, the trend toward the US becoming a major energy exporter is dependent upon the “significant projected increase” in natural gas exports to Mexico and the rest of the world.
But what happens if the US withdraws from NAFTA? Gas to Mexico will no longer be unencumbered by heavy tariffs, a situation which could motivate Mexico to source it natural gas elsewhere. The system of resolving international trade disputes, called investor-state dispute settlement, that oil and gas developers in Mexico such as ExxonMobil rely upon, would also go away.
That’s why Jack Gerard, the head of the American Petroleum Institute, which represents natural gas companies, urged the Trump administration to stay in NAFTA even if an update to the agreement cannot be brokered between the US, Mexico, and Canada.
“Global trade flows have played a critical role in America’s energy renaissance, spurring economic growth and investment and creating American jobs,” said Gerard. “North America provides a great example of integrated and interdependent energy markets that benefit all three trading partners. And NAFTA has been critical to that success. NAFTA makes energy more affordable and improves opportunities for U.S. companies in Canada and Mexico. As the administration continues negotiations with Canada and Mexico, we urge them to seek modernization in ways that maintain these benefits.”
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