Join the Dialogue – Trump Plans on Announcing a Preliminary NAFTA Agreement in Peru

NAFTA In the News

Recent NAFTA talks have drawn concern and tensions on both sides of our borders. Talks about the future of NAFTA were previously scheduled to have been resolved by March 31st, but with no resolution to speak of, these talks might be extended well into 2019.

NAFTA news has been moving quickly. According to Bloomberg, the Trump administration is pushing to reveal a preliminary NAFTA deal as soon as April 13th during the Summit of the Americas. Whether the United States pulls out of the treaty altogether, or if the organization can come to an agreement on a reform, trade and the economy of all parties involved will be affected. Arguably the industry that stands to be affected the most by these talks is the energy industry.

Will the U.S. be pulling out of NAFTA?

According to NAFTA news sources across the board, there are no actual plans for pulling out of NAFTA. This is even further confirmed given the recent indications from the White House around a revised general outline of NAFTA, which is expected next week. However, as recent as this week, President Trump has been actively discussing NAFTA on Twitter, and warning Mexico he is ready to back away from NAFTA if illegal immigration and drug smuggling doesn’t stop immediately. The question remains whether Trump was simply letting off steam about weak border laws and immigration, or whether he truly has measures in place to power down the North American Free Trade Agreement.

How would a withdrawal of NAFTA affect the energy industry?

The energy industry in Texas is thriving, and many would agree that this is largely due to the terms set forth by NAFTA. Around 60% of Mexico’s natural gas supply is purchased from the U.S., the majority of which is produced in Texas. Mexico is one of the largest purchasers of U.S. natural gas, as importing natural gas from the U.S. has largely been cheaper than producing it. Mexico has become increasingly reliant on clean energy sources such as natural gas, as they have chosen to transition away from fossil fuels. According to JTC Energy Research Associates, gas now supplies 45 percent of all energy and 60 percent of electricity in Mexico.

If the dissolution of NAFTA became a reality, Mexico would be required to obtain a permit to import natural gas from the United States. This could prove to be very time consuming and cumbersome, as the permitting process for non-NAFTA entities can take years, with a considerable amount of paperwork involved. This would result in a huge setback for Mexico’s efforts towards energy reform.

Another drawback to consider: being unable to sell natural gas to Mexico during this waiting period will result in years of lost capital for the United States. Trump’s recent comments related to NAFTA news are attributed as one of the reasons stocks are dropping, alluding to the public concern of a possible trade war.

By attending the upcoming Mexican Energy Series, you will hear from the key decision makers themselves on the latest regarding the NAFTA renegotiations, cross-border collaboration and the status of the Nogales grid project. The conference offers featured days for Upstream, Midstream, and Power & Electricity sectors occurring April 17-19, 2018. The agenda brings to light the most important conversations in the energy industry – from bidding rounds and joint ventures to NAFTA and the presidential election. Here are some of the discussions you can expect to be a part of regarding NAFTA:

Midstream Day April 18, 2018 – Register Now

What is the future of the symbiotic US-Mexico natural gas relationship?

• Will Mexico continue to rely on US natural gas imports or will we see an increase in domestic production?
• What role does NAFTA play in the ability to get US natural gas across the border?
• Will shale gas mark an end to the dependency on US natural gas imports? How far away is that reality?
• What potential impact can the Mexican elections have on US-Mexico energy trade?

Power & Electricity Day April 19, 2018 – Register Now

• What impact will US-Mexico relations have on the electricity grid?
• Are the NAFTA renegotiations helping or hurting Mexico’s ability to receive natural gas and electricity at competitive rates?
• Will companies warm up to direct investments as the market continues to evolve?
• Perspectives, impact and challenges of private participation in electric transmission lines in Mexico

How might next week’s U.S Proposals for NAFTA hurt U.S. energy exports?

NAFTA talks with U.S. Officials and leaders from Canada and Mexico are happening next week in Washington for the 8th time. President Trump repeatedly calls NAFTA “Mexico’s cash cow,” and many supporters agree with Trump that the North American Free Trade Agreement (NAFTA) needs to be revised. Other GOP lawmakers, like Senate Finance Committee Chairman Orrin Hatch, have gone on record stating that withdrawing from NAFTA would break the bank for the U.S.. Meanwhile, Texas representatives are calling for an update of the treaty, rather than a dissolution, citing the importance of the treaty to Texas’s economy and the economy of the United States as a whole. For example, in 2017, Mexico accounted for nearly 37% of Texas’s export business, pulling in over $97 billion to the state for goods and services. From this standpoint, altering the treaty in any way that would differ from its normal operating process seems like a huge risk to take.

Those in favor of NAFTA renegotiations, or a full withdrawal from the treaty, claim that the status of the North American energy industry will continue to remain strong on its own. Advocates for reform claim that the potential taxes and tariffs will “even-out,” as certain goods will be taxed as they cross the border, and will remain tax free when they reenter the U.S or cross an alternative border. For example, oil imported from Canada could be taxed as it enters the United States. However, once it has been turned into gasoline, it will not be taxed as it enters Mexico, and vice versa.

According to the most current NAFTA news, it’s not hard to speculate that there will be an adverse effect on U.S. energy exports, given that Mexico is currently one of the biggest consumers of U.S. natural gas. Unfortunately, there are many questions that will remain unanswered until NAFTA negotiations between the U.S., Mexico, and Canada have reached a conclusion. Ideally, the intentions of these negotiations are to put the United States into a better trade position than it is now, as our bilateral trade balance with Mexico went from a $1.3 billion-dollar surplus to a to a $64.1 billion deficit in 2017, according to The Office of the United States Trade Representative.

Want to discuss the issues surrounding NAFTA in person with Mexico’s energy leaders? Join executives and decision makers in E&P, investment, market competition, strategic planning, policy setting and more at the Mexican Energy Series.