NAFTA: Building North American Energy Security

May 9, 2018

American Security Project

By American Security Project

Introduction
Energy security is a key part of a country’s national security. The United States must remain able to fuel its economy and power its defense without challenge from hostile actors.

The United States is fortunate to be blessed by abundant energy resources – of all types – that assure energy security today. The United States is even more fortunate to have two allied neighbors who are also blessed by complimentary supplies of energy resources. When these three countries signed the North American Free Trade Agreement (NAFTA) in 1994, they brought their economies together, drawing their fortunes together on energy security as well.

Over the last decade, the energy revolution has changed America’s energy outlook. A flood of oil and gas from American shale deposits has rapidly increased production and available reserves within the United States. Similar geology exists across the border with Mexico. Increased investments by Canadian producers have made Canada the third largest exporter of oil in the world.1

The Trump Administration has sought to exploit these gains, and foster more expansion of hydrocarbon exploitation, in the name of “American energy dominance.”

However, a better term would be “North American energy security” – because 24 years of NAFTA have integrated the energy business of the United States, Canada, and Mexico into a single energy economy. Recent policy changes, like the 2015 removal of the U.S. Crude Oil Export Ban in the U.S. and the 2013 liberalization of Mexico’s energy sector, have allowed further integration of the North American energy economy.

Because energy commodities like oil and gas are generally traded tariff-free around the world, the value of Free Trade Agreements like NAFTA for energy security are not in duty-free market access, but in the protections that these agreements provide to investors, the incentives they provide to promote cross-border infrastructure like pipelines, and the reduced costs that low tariff rates provide to inputs like steel that are used for infrastructure.

This Fact Sheet will highlight the growing interconnections of the North American energy market and the opportunities that a modernized NAFTA presents to further increase energy security.

See eight-page fact sheet here.

(A note on sourcing in fact sheet: unless otherwise referenced, all numbers are taken from the U.S. Energy Information Agency, and are available at EIA.gov).

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