USMCA Trade Deal Is A Win For Texas Energy Producers

The deal that replaces NAFTA prohibits tariffs on oil and gas. That benefits U.S. Oil companies that sell gasoline in Mexico.

By Alexandra Hart & Kristen CabreraOctober 8, 2018 2:09 pm| ,

President Donald Trump’s new trade deal, the USMCA, appears be beneficial to big oil and gas companies. Canada recently signed onto the new deal, along with the U.S. And Mexico, in a deal that replaces NAFTA. The new deal also has broad implications for the Texas economy, particularly energy production.

Matt Smith, director of commodity research at ClipperData, says the new agreement includes provisions that help protect U.S. oil company investments abroad.

“It also prohibits tariffs on oil and gas products, which is pretty handy for the U.S. because it’s including gasoline sold to Mexico by U.S. refiners,” Smith says.

The new agreement includes an ISDS, or investor state dispute settlement, which is intended to resolve international trade disputes. NAFTA included ISDS provisions, and many of these were removed from USMCA. But the oil and gas sector will continue to use that mechanism. Smith says U.S.-based oil companies like Chevron and Exxon-Mobil now have a stronger legal footing in Mexico and are able to bid in oil auctions.

While the new trade deal is a win for big oil and gas companies, setbacks continue for environmentalists. The deal avoids any mention of climate change, and, like NAFTA, supports continued fossil fuel development.

“A key theme of the U.S. administration is running through USMCA as it does through a lot of their actions, and that’s a lack of regulations. The issue is really here that USMCA could continue to allow companies to move polluting practices to jurisdictions that just have weaker environmental regulations,” Smith says.

Written by Alexia Puente.