After NAFTA: New Risks to North American Gas Trade?

01 December 2018
Dr. Jeff D. Makholm

In an upcoming article in the December 2018 issue of the Wiley journal Natural Gas & Electricity, NERA Managing Director Dr. Jeff D. Makholm examines the core of the North American Free Trade Agreement (NAFTA) and its successor, the United States-Mexico-Canada Agreement (USMCA), as they relate to the cross-border trade of oil and gas between the three countries. Oil and gas differ from other trade goods covered by NAFTA and the USMCA. The United States, Mexico, and Canada all had to solve the problems of moving oil and gas across their countries before they could contemplate pipeline-based exports. Dr. Makholm explores the pre-NAFTA market and trade conditions that led to the agreements that would encourage further trade, avoid tariffs, and provide some insurance against reneging on established deals.

Dr. Makholm notes that the USMCA does little to modify North American trade for the oil and gas sectors. This includes retaining the zero-percent tariffs on the trade of oil and gas, as well as the Investor-State Dispute Settlement (ISDS)—an arbitration procedure used to resolve foreign investment conflicts under international arbitration—for US hydrocarbon investors in Mexico. ISDS provides some measure of protection for foreign investors against the risks of investing in capital-intensive, long-term energy projects not covered by other treaties. With the USMCA in place, Dr. Makholm provides an analysis on the future landscape of US exports to Mexico and Canada and the relative openness of oil and gas trade between the three countries.

Makholm, Jeff D. (2018, December). After NAFTA: New Risks to North American Gas Trade? Natural Gas & Electricity 35/05, ©2018 Wiley Periodicals, Inc., a Wiley company.