BEATS THE ALTERNATIVE
How the oil industry learned to love the new NAFTA trade deal.
WASHINGTON — When negotiations for a replacement for the North American Free Trade Agreement began early in the Trump administration, U.S. oil and gas lobbyists had one major goal.
They insisted any new agreement should maintain longstanding protections for corporations operating overseas, to compensate them in the event a foreign government shifted policies to hurt their business. So if a foreign government was to take over their oil fields and refineries — of which there is a long history for American firms operating in Latin America — companies could go to court.
But in an era when the movement of jobs overseas has become a defining political issue for President Donald Trump and Democrats alike, the provision contained in the original 1994 NAFTA agreement was scrapped — viewed as offering companies added incentive to move their operations to Mexico by reducing the risks of locating in foreign countries.
Yet oil and gas groups are cheering the deal — with reservations.
“There’s a couple things we would have liked to have seen on protecting refining in Mexico, but the most important thing is to make sure we have a durable trade agreement and no threat in place,” said Derrick Morgan, senior vice president of the American Fuel and Petrochemical Manufacturers, a trade group.
The truth is that despite objection from a contingent of pro-business ideologues in the Republican Party, there was little support for corporate protections. In a once unimaginable alliance, House Democrats and the Trump administration came together to craft a deal heavy on policies keeping industry in the United States and short on the corporate friendly edicts that have defined American trade deals for decades.
“We have created a deal that will benefit American workers, farmers, and ranchers for years to come,” U.S. Trade Representative Robert Lighthizer said in a statement. “This will be the model for American trade deals going forward.”
Mexico and Canada are major trading partners for the U.S. oil and gas industry, with the unencumbered flow of natural gas and oil back and forth across borders critical to keeping to refineries humming and drillers drilling. No United States-Mexico-Canada Agreement might also have meant the end of free trade in North America. In such a scenario, trade wars would unfold, and those natural gas pipelines running into Mexico, which now carry almost half of U.S. gas exports, could have been hit by tariffs.
Skepticism, if not dislike, of NAFTA brought Trump and Democrats together. The president has described the deal as terrible, while Democrats have grown critical of the pact since former President Bill Clinton signed it.
But not everyone is on board. Texas Republican Sen. John Cornyn told Lighthizer on Thursday that Republicans had been “frozen out” out of negotiations.
“It leaves a little bit of a bitter taste in people’s mouth,” he said, according to Politico. “I just don’t like being jammed.”
But in the end, the sheer volume of North American commerce makes it unlikely that most Republicans will block the USMCA, especially those from border states such as Texas, where exports to Mexico reign supreme.
“This is an important piece of legislation and a treaty we need to put through the Congress,” Rep. Michael McCaul, R-Austin, said Thursday. “We are talking about 12 million American jobs, about $1.2 trillion dollars for the American people. In my home state of Texas, Mexico is the largest trading partner and it is about 1 million jobs for Texas and $137 billion.”