Congressional Hearings Stress the Importance of NAFTA

December 13th, 2017

Today the U.S. House Committee on Energy & Commerce Subcommittee on Energy held a hearing to examine the impacts and future of North American energy trade. A clear takeaway from the testimony of the witnesses and the Members’ questions is that NAFTA plays a critical role in supporting the United States’ energy and manufacturing sectors.

Free energy trade with Canada and Mexico has enabled the United States and North America as a whole to be closer than ever before to achieving energy self-sufficiency.

Chet Thompson, President and CEO of American Fuel and Petrochemical Manufacturers made this point stating,

“As a result of increased energy production and the increasingly integrated North American energy market, the International Energy Agency (IEA) now projects that North America will be energy secure by 2020.”

Additionally, an integrated North American energy market has been a boon for the U.S. economy. Ms. Karen Harbert, President and CEO of the Global Energy Institute at the U.S. Chamber of Commerce testified,

“For the last six years, we’ve been running a trade surplus with Canada and Mexico in refined petroleum and coal.”

 

 

One reason that the U.S. energy sector has thrived under NAFTA is because of its Investor-State Dispute Settlement (ISDS) provisions. Strong investment protections promote U.S. interests and this is especially evident in the current successes of American energy companies. Withdrawing from NAFTA or significantly weakening ISDS provisions, as has been suggested by the U.S. Trade Representative, undermines the U.S. energy sector and the broader goal of achieving North American energy independence.

Representative Bill Flores from Texas spoke on this at the hearing stating,

“On one hand the White House says we believe in energy dominance for our country and for North America. On the other hand the USTR is undercutting that by any conversation about getting rid of the ISDS mechanism.”

In its current form NAFTA has also been a huge benefit for U.S. manufacturers. Mr. Allen Burchett, Global Head of Strategic Projects, ABB Inc. stated,

“Canada and Mexico alone purchased one-fifth of all U.S. manufactured goods in 2016, more than the next ten U.S. trading partners combined.”

The sentiment voiced at today’s Energy and Commerce hearing was reflected in yesterday’s House Foreign Affairs subcommittee hearing. Testimony before the Subcommittee on Terrorism, Nonproliferation, and Trade also highlighted NAFTA’s importance to the United States, specifically regarding job creation and business development.

Eric Farnsworth, Vice President of the Council of the Americas, emphasized the fact that NAFTA is not the cause of current economic challenges in the U.S. He said,

“The economic and political challenges that face the United States at this moment in time are significant…But NAFTA is not the culprit, and ending NAFTA will not bring back an earlier time nor will it provide U.S. leverage to promote the values that we hold dear.”

In fact, the Honorable John D. Negroponte, Vice Chairman of McLarty Associates and Former Deputy Secretary of State and Director of National Intelligence testified that withdrawing from NAFTA would only serve to hurt American workers.

“In many areas struck by job losses, workers find themselves underwater in their homes, unable to sell, unable to leave to pursue other economic opportunities…But withdrawing from NAFTA to attempt to address these issues is like putting a splint on your arm to try to heal a broken leg.”

Daniel Allford, President of ARC Specialties echoed this point testifying,

“I can beat the competition, but I can’t beat the tariff.”

Terminating NAFTA would be a disaster for the U.S. economy and harm North America’s ability to be energy self-sufficient. However, the long-term ramifications extend even deeper than that. Energy and Commerce Subcommittee Ranking Member Bobby Rush (D-IL) expressed this point at today’s hearing.

“I do have concerns with the constitutionality of a President changing or overturning a trade agreement passed by a congress. I also have concerns with the global perception of the credibility of the United States when allies cannot depend on the sincerity of the U.S. government when a new President takes office that reneges on previous administration actions.”

A NAFTA withdrawal would harm for the U.S. economy and American workers at large, but it would also dramatically injure the perception of the United States abroad. Ultimately, the long-lasting impacts from withdrawing from NAFTA would be severe and felt for generations to come.

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