With North American Free Trade Agreement renegotiations on the horizon, energy concerns seem centered primarily on preserving features that helped create more integrated oil, gas, and electricity markets in Canada, Mexico, and the US. Comments that the American Petroleum Institute submitted to US Trade Representative Robert E. Lighthizer on June 12 basically confirm this.
“The overall functionality of the current NAFTA agreement works for the oil and gas industry,” API Vice-Pres. Kyle Isakower said. “API and its industry members therefore wish to ensure that as NAFTA is modernized, the provisions of the current agreement remain in place.”
These include the absence of tariffs on goods across the three countries’ borders that facilitates substantial trade and investment and ensures a wider variety of products available for consumers across North America, he continued.
API also approves of substantive investment protections that are supported by NAFTA’s robust investor-state dispute settlement mechanism, Isakower said. It requires prompt, adequate, and effective compensation for expropriation of investments and provides a neutral forum to resolve disputes between investors and host governments, he explained.
NAFTA’s liberalization of energy trade among the three countries—particularly the automatic liberalization under the US Natural Gas Act of exports to Canada and Mexico because NAFTA is a free trade agreement—directly benefits US companies with investment opportunities that would not be available otherwise, according to Isakower.
“API supports the liberalization of all trade of crude oil, gas, liquefied natural gas, and all refined products and petrochemicals or other energy-intensive manufactured goods reliant on natural gas between all three countries,” he said.
While Mexico’s hydrocarbon market originally was not part of NAFTA, the country’s subsequent energy reforms trigged a “ratchet clause” that provides national treatment for US companies’ investments there comparable to access to Canada’s markets, Isakower said. “API supports market access to foreign investors in domestic markets, without exceptions,” he noted.
Areas for improvement
Areas where API thinks NAFTA could be improved include coexistent clauses that preserve strong investment provisions among overlapping agreements between parties, intellectual property rules that follow norms in the World Trade Organization’s agreement, and labor mobility provisions so industry personnel could cross national borders during emergencies as well as normal periods.
API also would like to see a renegotiated NAFTA have strong provisions to prevent the “dumping” of products that materially threatens an existing industry or retards establishment of domestic enterprises; more flexible language for rules of origin and diluent; and a regulatory coherence chapter that preserves the three countries’ autonomy.
This last feature could help establish a cooperative process that promotes regulations that are risk‐based, use sound science and data, and incorporate cost‐benefit analysis, Isakower suggested.
