The Senate Should Ratify USMCA, Deliver Key Benefit to the People
In a news cycle dominated by tension in the Middle East, you may have missed something that will provide a direct benefit to American consumers and business. Yesterday, the Senate Finance Committee approved – and yes, its true – did so with overwhelming bipartisan support - the United States-Mexico-Canada Agreement (USMCA). This action moves us closer to putting a modernized version of NAFTA on the president’s desk.
Let’s hope that the full Senate takes up the agreement soon. Originally passed in 1993, NAFTA has long needed an upgrade into the 21st Century. Mexico has realized the urgency, already ratifying the USMCA. Canada is expected to approve the agreement when its House of Commons reconvenes in late January.
Ratifying USMCA is important for American workers. The U.S. economy is experiencing historically low unemployment levels, a trend that Goldman Sachs expects to continue. The USMCA can extend that good fortune by re-incentivizing trade businesses and securing critical partnerships, many of which hinge on dealings with Mexico and Canada. Trade with Canada and Mexico now supports nearly 12 million U.S. jobs, with more than a third of those created and supported by the former NAFTA deal, which created nearly 31 million American jobs since 1993.
The deal is particularly critical on the energy front. With American energy supplies booming, Canada and Mexico have become invaluable energy trade partners. Canada remains the largest destination for U.S. crude oil exports and a massive market for natural gas exports, with energy accounting for $25 billion, or about 8%, of the value of all U.S. exports to Canada in 2018. In February 2019, for example, U.S. natural gas exports to Canada topped 3 billion cubic feet per day, the highest level on record.
Energy represents an even larger slice of the pie for trade with Mexico, representing 12% of the value for all U.S. exports to Mexico last year. U.S. exports of petroleum products to Mexico nearly tripled over the past ten years, reaching a record high of $30.5 billion in 2018. These exports, combined with energy supplies heading north to Canadian markets, have the U.S. on track next year to become a net exporter of crude and fuel for the first time.
While robust energy trade is good for American suppliers, it could also help resolve some emerging issues in Mexico. As the Wall Street Journal has reported, under the leadership of President Andrés Manuel López Obrador, Mexico is looking to take a nationalist approach to energy, retreating to some degree from North American energy markets in a move toward self-sufficiency. A ratified USMCA is key to preserving free energy trade across the border, orienting Mexico’s energy outlook toward growth and countering any nationalist trajectory. A new agreement assures that energy trade will remain free and uninterrupted, attracting private investment, lowering capital costs and reducing energy costs to consumers.
Moreover, a unified trade market across North America makes an important geopolitical statement. A few weeks ago, China and Russia opened the spigot on a 1,800 mile, $55 billion pipeline to deliver Russian natural gas to China. The pipeline is part of a $400 billion gas-supply deal that the two neighbors signed in 2014. Our biggest global competitors recognize the value of long-term energy partnerships. Will we?
With USMCA in place, the U.S. will have guaranteed markets – something that will encourage private infrastructure investment like export facilities and pipelines. We’ll also have the stability and policies to extend economic growth and high levels of employment. With the iron hot, the Senate should act now to ratify USMCA and deliver a key benefit to the American people.
