Keep free trade features in a new NAFTA, trade group leaders urge

Upcoming renegotiations of the North American Free Trade Agreement should embrace its principles that significantly improved free trade among Canada, Mexico, and the US by allowing goods and services to move freely across borders, two national trade association leaders agreed.

“From the energy sector’s standpoint, anything that promotes the movement of goods and services under free commerce is worthwhile,” American Petroleum Institute Pres. Jack N. Gerard said during the May 31 discussion at the Bipartisan Policy Center in Washington.

“Global energy geopolitics have changed dramatically. North America is becoming the global energy trade epicenter,” Gerard said. “We have US Gulf Coast refineries that export heavy Mexican crude oil and turn it into products that are sold right back to Mexican customers.”

A second panelist, National Corn Growers Association Chairman Charles Bowling, said US agricultural markets have become unstable as the Trump administration issues sometimes conflicting trade announcements.

“Any 23-year-old agreement can be strengthened because technology exists now that was inconceivable when it was adopted,” he said. “We would like to make channels of trade easier. We know that NAFTA has worked. We don’t want anything blocking that. Any changes need to be constructive.”

Their remarks came a day after more than 50 US House of Representatives Democrats and Republicans asked US Trade Representative Robert E. Lighthizer in a letter to consider North American energy independence as he begins talks with representatives from Canada and Mexico about modernizing the NAFTA (OGJ Online, May 31, 2017).

Constructive conversations

“The American people benefit most when borders are open and energy flows freely across them,” Gerard said. “We believe we can have constructive conversations with the administration. So far, what we’ve heard is exactly that.”

Bowling warned that imposing tariffs on incoming goods would be counterproductive. “We have a willing customer in Mexican businesses which want to buy our products. If they don’t have a chance to sell some of what they produce here, it would be bad,” he said.

A week earlier, officials of a Mexican trade mission visiting Washington said that suppliers of agricultural goods in Brazil and Argentina have indicated they are ready to step up if the US decides to erect trade barriers against Mexico, Bowling said. “We need to make sure our products more easily to buyers in other countries. That’s the foundation of effective trade policies,” he said.

Free trade in energy across North American countries’ borders is part of a global energy investment system, Gerard noted. “Being able to export our domestically produced crude oil after so many years has been very important. A lot of customers in other countries would like to buy it,” he said.

“A lot of energy interdependence takes place across North American borders. By 2020, the continent could be fully energy independent, and consumers in all three countries would clearly benefit,” Gerard said. Mexico’s domestic energy reforms in the past few years have been especially significant, making investments there more favorable because of the increased certain that has resulted, he said.

‘First, do no harm’

The event also included remarks by US Secretary of Commerce Wilbur L. Ross Jr., who said that any NAFTA renegotiation would begin with US negotiators adopting a tenet of physicians’ Hippocratic Oath: “First, do no harm.”

But the agreement did not address several issues that have emerged since it was adopted 23 years ago, Ross said. “It also lacks significant enforcement, which basically makes it a very nice agreement that has no teeth,” he said.

Areas that NAFTA does not cover now will be where the administration starts, Ross said. “We also would like to develop some basic principles that we could use as starting points for other trade agreement negotiations,” he said.

“Any big change would need congressional approval. That’s why we’re starting with much easier issues like trade promotion,” said Ross. “We have to have very detailed conversations with Congress about what we want to do.”

Asked following the event whether proposals such as a Border Adjustment Tax potentially could blow up NAFTA renegotiations, Gerard said API is hearing less about them now that it did early in 2017 when some House members trotted them out.

“[House Speaker Paul D. Ryan (R-Wis.)] said last week that the emphasis now is on finding ways to pay for any reforms,” Gerard told OGJ. “The most positive development is that we’re finally seeing key figures in the House, Senate, and administration starting to work together to identify and address the most pressing issues. It’s a substantial improvement from the beginning of the year.”

Contact Nick Snow at nicks@pennwell.com.

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