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Pacific Northwest Growing on Trade, Cheap Canadian Natural Gas, Says Avista Economist

Economic growth in the Pacific Northwest is outpacing the national economy, and in the near-term, cheaper energy supplies and the North American Free Trade Agreement (NAFTA) are keys to continuing this trend, said the chief economist of Avista Utilities.

During a Northwest Gas Association webinar on Thursday, Grant Forsyth said cross-border trade with Canada has played an increasingly important role in the Northwest region and the U.S. gross domestic product (GDP). 

Forsyth, who also is a member of the Washington governor’s economic council, said Canada is the top trading partner for the four-state region of Idaho, Montana, Oregon and Washington.

"Energy is incredibly important to the region's near-term economic growth," he said. "If you look at what we can buy Canadian gas for now in the Pacific Northwest versus what it is at Henry Hub, we're getting an incredible deal.”

From the perspective of Pacific Northwest utilities, lower priced Canadian gas allows savings to be “passed along to customers.

“Right now, people with gas heating have way lower energy bills than people with electric heat. And what that does is free up a lot of spending for other parts of the economy, so I think energy plays a crucial role."

Forsyth offered a positive economic outlook for the region, which he said was outperforming the overall U.S. economy. He projected a rate of growth for the national economy of 2.6% this year and 2.2% in 2019.

According to his economic data, since 2013 the Pacific Northwest "has substantially outperformed" the nation as a whole. However, there are potential stumbling blocks for international trade.

Forsyth said the relative importance of trade to nations can be measured by its percentage of GDP. In 1960 trade was about 10% of the U.S. GDP compared to 27% today. In Canada, trade accounts for 63% of GDP, while in Mexico it is 79%, he said. In 1960, Mexico's trade represented 20% of its GDP.

"For all of North America we have seen a growth in trade dependence, and to some extent, I see that as a reflection of the success of NAFTA," he said.

Without NAFTA, Mexico's economy would be far worse off, and there would be even more "tension" over immigration, mirroring what various factions have told Congress in support of continuing the trilateral trade deal.

Forsyth said "helping Mexico grow" through NAFTA has created a reason for more Mexican citizens to stay south of the border. "One of the things I worry about is that if we get into a broader trade war it could damage growth in Latin America and Mexico, worsening the immigration problems perhaps."

He also was asked if he sees benefits to the U.S. economy from the efforts to deregulate more at the federal level.

"One of the problems in the United States, according to utility management at least, is that the current push to deregulate is very partisan and ideally should be bipartisan," Forsyth said. "One of the problems from a business perspective is figuring out how much of the ongoing deregulation is going to actually be permanent, and how much will be temporary based on the current fractured U.S. political environment."

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