OPINION: Want To Keep America’s Energy Boom Going? Sign NAFTA 2.0
A strange part of Barack Obama’s tenure as president was his passive-aggressive contempt for American economic competitiveness. To many, it looked like he wanted the U.S. to fall behind in when he famously announced in 2012, “Even if we drilled every square inch of this country right now, we’re going to be relying on other countries for oil.”
Fast-forward to the Trump administration, which is aggressive about keeping America on top. After two years of President Trump, the U.S. has become a net oil exporter for the first time in 75 years.
Obama: 0. America: 1.
To those who disdain traditional fossil fuels, keep in mind that the U.S. is one of few developed nations to reduce its CO2 emissions this year. We are — to borrow a phrase — winning, both on the energy front and the environmental front.
This is great news for everyone, especially since increased revenue from oil keeps our economy wealthy enough that we can continue funding research on cleaner energy. To keep this particular motor running, we need the United States-Mexico-Canada Agreement (USMCA), the Trump administration’s renegotiated successor to NAFTA — also known as Nafta. 2.0.
To maintain America’s newfound energy dominance, USMCA includes special provisions about energy cooperation among the three nations. For example, Mexico and Canada have heavy grades of oil we don’t produce, but can refine more efficiently and affordably, as one chemical engineer noted in Forbes. Meanwhile, the top two recipients of U.S. petroleum product exports (gasoline, diesel, propane, ethane) are Mexico and Canada.
They sell us oil, we refine it, they buy it back. Everyone comes out ahead.
The USMCA also ensures security of American energy investments. It restricts Mexico from changing energy reforms made in the last few years, as has happened with foreign investors in places like Ghana and Nigeria. So deals that have already been struck are secure, and future American investors know their money will be safe in Mexico. Since May 2017, American oil companies have committed to $6.5 billion worth of investment in Mexican oil and gas — no one wants to see those cross-border investment opportunities dry up.
Due to the integrated nature of North American energy, free trade attracts private investment, lowers capital costs, and reduces energy prices for consumers. Energy supply chains are so highly integrated at this point that disrupting them is in no one’s best interest. USMCA preserves a zero tariffs policy for oil, gas, and petroleum products across both North American borders.
The world needs fossil fuels for the foreseeable future. Most people would probably rather buy it from a consolidated North American trading bloc than Russia, Venezuela, or Saudi Arabia. In 2018, North America’s combined energy output makes up 19 percent of crude oil, 28 percent of natural gas and 12 percent of coal output worldwide. This cooperation, plus the 21st century revolution in oil shale, has helped fuel an energy renaissance no one could have predicted when NAFTA was first signed.
Energy is an easy place to see the synergy for North American free trade, but it also benefits industries as disparate as agriculture, automobiles, small business, and textiles.
Trump has challenged long-standing conservative orthodoxy with his iconoclastic stance on trade. While NAFTA has been mostly positive for most parties involved, that doesn’t mean that America couldn’t get more out of it than it had before, because the goal is of any negotiation should be to get the most out of it that you can, not be happy with the status quo. (Some might call this the art of a deal.)
The United States exports more to Canada and Mexico than anywhere else in the world, which is an opportunity for all involved. Moreover, the USMCA modernizes trade relations for digital trade, e-commerce and IP rights. To any ideological purists who may think Trump’s new deal is unnecessary, keep in mind that NAFTA was written before most people had even heard the term “email.” We are long overdue for NAFTA’s modernization.
As Congress votes on the USMCA in 2019, outcomes for all Americans need to preempt politics. Democrats can’t let partisanship interfere, and Republicans shouldn’t cling to old ideas. Trilateral commerce is critical for establishing a North American trading bloc to rival the European Union and push back on China. For example, North American free trade has allowed the auto industry to compete better with China through cross-border supply chains, lowered production costs, and increased productivity.
Under USMCA, America will continue to win, which is something everyone in Washington should agree on.
Jared Whitley served as press liaison for Sen. Orrin Hatch (R-Utah) and as associate director in the White House under George W. Bush. He earned his MBA from Hult International Business School in Dubai.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.