Opinion

Enforcing USMCA and U.S.-China Trade Agreement Is Pivotal for America’s Energy Leadership

Last week, President Andrés Manuel López Obrador traveled to Washington, a week after the United States-Mexico-Canada Agreement (USMCA) entered into force. This landmark trade agreement will serve as a framework to help foster stronger economic relationships among the nations of North America. 

Canada and Mexico remain our largest export partners, and the USMCA will be crucial to helping revitalize economies recovering from the pandemic. According to the Commerce Department, total trade with Canada and Mexico reached nearly $1.3 trillion in 2017, supporting more than 11 million U.S. jobs.

The U.S. oil and natural gas industry supports free trade and the development of free trade agreements to establish markets and build relations among countries. Trade agreements, like the USMCA, provide significant benefits for a more secure U.S. energy future and other economic benefits. America’s energy resources have changed our standing, economy and security for the better by providing affordable, reliable energy to America and the world. 

Mexico is the leading market for U.S. exports of natural gas, gasoline, fuel oil and total refined products, while Canada is the largest market for U.S. exports of crude oil. These trade relationships support millions of good-paying jobs here at home, including supporting more than 1 million jobs across Pennsylvania, West Virginia, Ohio, Texas, Oklahoma, North Dakota, Colorado and New Mexico.

But like all agreements, the USMCA’s success hinges on implementation and day-to-day engagement on issues. Amidst the celebration of this historic agreement, it is important that the administration also use the occasion to address troubling developments in Mexico that contradict the investment protections provided by the USMCA and threaten the potential economic benefits of this agreement. 

A number of recent actions taken by the Mexican government discriminate against U.S. investors, violating commitments made by Mexico and undermining the framework of the USMCA. For example, U.S. investors are facing discrimination as foreign investors for permitting obstacles on a range of projects in Mexico, including new or rebranded gas stations, third-party storage facilities, imported fuels, liquids terminals and liquified natural gas terminals.

Another recent trade agreement, the U.S.-China Trade Deal, which President Donald Trump and Chinese Vice Premier Liu He signed earlier this year, provides a similar promise. Under Phase 1, China agreed to purchase an additional $200 billion in U.S. goods over two years, including $52.4 billion in American energy. This agreement has the potential to significantly increase domestic oil and natural gas producers’ access into a new market.

As with the USMCA, on the U.S.-China trade deal, U.S. policymakers should continue to engage on the Phase 1 agreement to support its implementation. Data shows that through April 2020, China’s purchases were only 3 percent of their year-to-date targets and only around 10 cargoes of U.S. LNG arrived in China in April and May. Further, Rapidan Energy Group estimates that Chinese imports of U.S. crude slightly increased in May to 0.74 mb/d, but decreased again in June to 0.5 mb/d. Also troubling is the fact that China has increased purchases of crude oil from Saudi Arabia and Russia in the first months of 2020.

Trade agreements also promote a cleaner environment. The United States leads the world in the clean and safe production of oil and natural gas. According to the  Environmental Protection Agency, from 2005 to 2018, total U.S. energy-related CO2 emissions fell by 12 percent. In contrast, global energy-related emissions increased nearly 24 percent from 2005 to 2018.

Enforcing trade agreements like the USMCA and the U.S.-China Trade Agreement is pivotal for America’s energy leadership. Last year, the U.S. Energy Information Administration projected that for the first time in history the United States would be a net exporter of energy. This new reality is driven by industry investments in innovation and efficiency and a more certain regulatory environment fostered by the Trump administration.

As the United States now leads the world in oil and natural gas production, we are uniquely positioned to meet the world’s growing demand for energy. But that will depend on adherence to global trade agreements. 

Anne Bradbury is CEO of the American Exploration and Production Council, and Mike Sommers is president and CEO of the American Petroleum Institute.

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