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Perry pitches energy ties as Nafta talks drag on

12 Oct 2017, 9.19 pm GMT

Perry pitches energy ties as Nafta talks drag on

Washington, 12 October (Argus) — US energy secretary Rick Perry is pushing for closer energy ties with Canada and Mexico, even as trade officials from the three countries struggle to find agreement on the North American Free Trade Agreement (Nafta).

Perry told a US House of Representatives panel today that he will host Canadian natural resources minister Jim Carr and Mexico's energy secretary Pedro Joaquin Coldwell to discuss ways to build a more robust energy market within Nafta and develop a common energy strategy. The meeting will take place in Houston on 13-15 November.

"We think it is really important that the North American region is as attached at the hip as it can be," Perry said.

The US administration lists support for Mexico's energy liberalization and promoting energy security of its neighbors among its key negotiating objectives for Nafta. On the surface, energy is one of the few areas without major disagreements among the three countries.

But energy industry insiders still worry that a breakdown of talks would have collateral effects on the growing energy trade within Nafta. Energy accounts for just under 10pc of Nafta trade flows of more than $1.1 trillion annually.

Nafta negotiators remain publicly committed to finishing talks later this year. Only two out of roughly two dozen chapters in Nafta have been finalized as the fourth negotiating round continue in Washington until 17 October.

The timetable is aggressive considering that trade talks typically start to move slower at the end of negotiations, House Ways and Means committee chairman Kevin Brady (R-Texas) said in a televised interview yesterday.

Brady spoke after members of his committee met with Canadian prime minister Justin Trudeau in Washington to discuss Nafta. Trudeau and government officials from Mexico have sought to engage senior members of Congress as a safeguard against President Donald Trump's threats to unilaterally withdraw from Nafta if his key objective of reducing US trade deficits is not achieved.

"Our committee, which you are visiting today, has constitutional responsibility for trade and is dedicated to ensuring that these negotiations are successful," Brady told Trudeau.

Trump, in turn, told Trudeau that "if we cannot make a deal, it will be terminated and that will be fine." Trump also suggested the US may end up striking a bilateral trade agreement with either Canada or Mexico if Nafta talks fail.

Trudeau said he remained optimistic about the successful conclusion of Nafta talks. But "we are ready for anything," he said. "Canadians are aware that the American president makes decisions that often surprise people."

A perception that Nafta talks may have stalled have prompted US Chamber of Commerce president Tom Donohue to blast the US negotiating position as an "existential threat to Nafta."

Donohue, in a speech in Mexico City earlier this week, said US negotiators are introducing "poison pills" to the negotiations — clauses guaranteed to raise conflicts that lead the talks to collapse.

He pointed to the US insistence on introducing a 5-year sunset clause into the Nafta text, tightening rules of origin to favor US manufacturers and abolishing investor-state dispute settlement. North American oil and gas companies have come out in support of preserving Nafta dispute settlement provisions.

Trump may not be able to unilaterally end US participation in Nafta without Congress' consent as the trade benefits are written into a 1993 US law, the Nafta Implementation Act, according to Gary Hufbauer, a senior fellow at the Washington-based think tank Peterson Institute for International Economics.

But US laws give the administration the power to impose tariffs that would annul many of Nafta benefits, Hufbauer said.

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