Fate in the U.S. of the North American Free Trade Agreement (Nafta) will influence the oil and gas business environment worldwide. And the effect won't be limited to petroleum markets.

Not that the health of markets isn't at stake; it is. When economies suffer, as they would in a world gripped with protectionism, oil and gas markets do, too. But U.S. handling of Nafta and repercussions elsewhere will have much to say about how countries elsewhere deal with international oil and gas companies. Capital is as much a part of international trade as are textiles, farm products, and television sets.

TWO OPTIONS

Royal Dutch/Shell Group makes this transcendent trade interest part of its planning. It postulates two scenarios that differ in their assumptions about political and economic liberalization, integral to which is the globalization of business. For now, says Lodewijk van Wachem, chairman of the Royal Dutch Petroleum Co. supervisory board, liberalization and globalization reinforce each other. But liberalization poses threats as well as opportunities. "Some will seize the opportunities," van Wachem told London Business School's Industry Club last June. "Others will try to restrict the threatening forces to protect what they have."

One Shell scenario thus assumes that continued liberalization and deregulation lead to a turbulent competitive environment with free international trade and investment, in which today's poorer countries grow quickly," van Wachem said. The other scenario envisions "a world in which rich and poor countries resist liberalization and continue to conduct their affairs defensively and on a national basis. Obviously, the two scenarios have a different impact on international order, on economics and politics, and on energy and the environment."

Congress will choose between those scenarios on Nov. 17, when it votes on Nafta. It will say whether the U.S. intends to seize the opportunities afforded by a world newly anxious to do business or to recoil from the trend away from statism and repression as though from a threat. The defensive option would, for international political purposes, annul U.S. support for broadening of the General Agreement on Tariffs and Trade (GATT). If the proposed new GATT doesn't overcome European resistance by Dec. 15, the Uruguay Round of trade talks will collapse.

With or without the link to GATT, the U.S. should ratify Nafta. Yes, jobs in protected industries would suffer if trade barriers came down between the U.S., Canada, and Mexico. But they'd be more than offset by jobs created by the economic growth resulting from brisker trade among neighbors.

WIDER ISSUES

And there are wider issues than that. The world has a chance to replace the nuclear standoff of yesteryear with a more constructive mechanism for enforcing world stability: transnational commerce. A host of developing countries have discovered that prosperity results when private ownership, competition, and personal freedom replace the subordination of individuals to governments and of markets to central planning. The U.S. provides the mold into which these emergent growth economies have cast their futures. It, of all nations, never must become the reason that the world fails to step in the direction of general prosperity.

If the U.S. does resort to protectionism, so will the world. Oil companies then should expect something much different in the way of markets, negotiating climates, and overall welcome than they might have expected if nations had dedicated themselves to trade and the creation of wealth instead of to rigid nationalism and the constant threat of war.

Copyright 1993 Oil & Gas Journal. All Rights Reserved.

INDUSTRY HAS LARGE STAKE IN NAFTA VOTE

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