In Congress' recent start at re-examining the North American Free Trade Agreement (NAFTA), a senior executive from Sempra Energy testified that the much-debated 23-year-old trade deal has been good for the U.S. energy sector.
Sempra Executive Vice President Dennis Arriola was among two panels of business, labor and academic/consulting representatives testifying July 18 at the House Ways and Means Committee's opening hearing on Modernization of the NAFTA, a first step in addressing the Trump administration's pledge to redo the trade agreement.
Committee Chairman David Reichert (R-WA) and ranking minority member Rep. Bill Pascrell (D-NJ) differed on the Trump administration assessment of NAFTA, but they agreed now is a good time to reassess and "improve" the agreement while preserving what Reichert called the "good" it has created in trade among Canada, Mexico and the United States. Arriola echoed that sentiment, urging Congress to "maintain existing benefits."
With more than $7 billion invested in Mexico in recent years and plans for billions more, Arriola said San Diego-based Sempra is the largest private natural gas pipeline operator south of the border, primarily in infrastructure owned and operated by Mexico City-based unit IEnova. Investment in Mexico is the principal reason Sempra has increased its global market capitalization by 45% in the past four years, reaching $28 billion last year, he said
"IEnova has facilitated most of the U.S. gas deliveries into Mexico, and as of 2016, we have almost 900 employees working there," Arriola told the committee. "Our investments in Mexico have made excellent business sense for Sempra Energy," while creating jobs and improving the environment in both countries.
"NAFTA has been a big win for the U.S. energy sector, and it has helped create a robust, integrated North American energy market that supports U.S. jobs and strengthens our energy security," said Arriola. U.S. trade with Canada and Mexico in energy commodities exceeds $140 billion annually, and last year the United States had an energy trade surplus with Mexico of more than $11 billion, he said.
Celeste Drake, trade and globalization specialist for the AFL-CIO, said that NAFTA has been too skewed toward helping corporations and "corporate cronyism," urging Congress to redo the trade deal to advance workers' wages and benefits in each of the three nations. "While CEOs and corporations have generally benefited from NAFTA, it has failed the working people of North America," Drake said.
Drake said the controversial trade agreement has increased trade across North America, but at the cost of eliminating jobs, depressing wages and weakening worker negotiating power while "destabilizing communities" in all three nations. "Trade deals will always be disruptive, both creating and destroying jobs, but NAFTA rules have redistributed income upward," she said.
Mexico currently accounts for more than 60% of all the U.S. natural gas exports. "We're just at the beginning of tapping the potential of the U.S.-Mexico energy trade," said Arriola, adding that Mexico's gas imports are expected to double in the next five years.
Arriola urged Congress to follow the principal in modernizing NAFTA of "maintaining the existing benefits while improving [the agreement] in ways that expand trade and investment." He said protecting cross-border investments by making those deals enforceable by investor-state dispute settlement (ISDS) is critical.
Drake was strongly critical of the ISDS provisions, saying it is too much of a corporate giveaway that benefits the trading companies to the disadvantage of the workers. In contrast, Arriola argued that companies like Sempra need "confidence that our companies and investments will be treated fairly over the long-term" in places where legal regimes are less developed.
"The investment protections in NAFTA and other free-trade agreements enable us to mitigate this risk, expand our business and compete for global customers," Arriola said. "ISDS provides a neutral forum to hear claims on a breach of the agreement, and even if ISDS is never used, it serves as an important insurance policy."