Trade with Canada and Mexico supports 11 million U.S. jobs, benefiting every state and every corner of the economy. Under the North American Free Trade Agreement, manufacturing sales supports jobs in 43,000 U.S. manufacturing firms. Canada and Mexico are top markets for American farmers, buying nearly one-third of U.S. agricultural exports.
Now add U.S. energy benefits to the long list of reasons to maintain these critical trade partnerships by approving the U.S.-Mexico-Canada-Agreement.
Canada and Mexico are our best energy customers, ranking as the top purchasers for a host of fuels. Canada is the top market for U.S. exports of crude oil and fuel blending components. Mexico is the top market for U.S. exports of gasoline, fuel oil, and total refined products.
That demand stimulates even more U.S. production, generating jobs and economic activity not just in energy development but across a range of industries throughout the supply chain. Infrastructure construction is just one example. U.S. pipeline capacity to export natural gas to Mexico’s rapidly growing market nearly doubled since 2015. That alone will support thousands of U.S. jobs for construction workers and supply businesses.
The more accessible energy markets are, the more energy we produce, and that means more jobs and greater energy security. The United States leads the world in natural gas and oil production, producing at record levels and significantly reducing reliance on overseas energy suppliers. Our trading partnerships with Canada and Mexico provide an additional stable source of energy that reinforces the buffer we’ve built against overseas disruptions.
In addition to being the top market for U.S. crude oil exports, Canada is also our No. 1 source of crude oil imports — not Saudi Arabia or some other OPEC competitor. That’s another way the deep integration of North American energy markets supports energy security. In fact, North America could be self-sufficient in liquid fuels as soon as 2020.
We wouldn’t be so close to that milestone without the market access and trade protections provided by the North American Free Trade Agreement, and now U.S.-Mexico-Canada Agreement.
Passing the new trade deal would solidify the benefits of continued trade with our neighbors rather than add to the economic uncertainty and harm caused by trade disputes. For a preview of the economic damage inflicted by trade restrictions, just look at the impact of the steel tariffs and quotas the Trump administration imposed on most major U.S. trading partners, including Canada and Mexico, last June. In the 10 months since the new restrictions have been in place, numerous U.S. manufacturers have been forced to cut jobs, shutter, or relocate overseas in response to cost increases for essential materials.
Like so many industries, U.S. energy companies require steel for every aspect of operations, from production to refining to pipelines to export facilities. When we need steel components that aren’t readily available in the U.S., imports from our neighbors meet our needs. Applying tariffs to those critical supplies significantly raises costs for U.S. industries, whether they produce fuels or cars that we then sell back across the border.
Finalizing the new agreement is a prime opportunity to jettison these self-defeating tariffs. Instead, the Trump administration is considering replacing tariffs with even worse restrictions: quotas. Where tariffs raise costs for essential supplies, quotas cut off the supply entirely once a pre-determined limit is reached. If you’ve ever needed to order a new part to fix your car, you can see the problem. Tariffs mean you can get the part, but it’ll cost 25 percent more. Quotas mean you may have to wait a year for the part, with no alternatives. Multiply that experience across the U.S. economy and you’ll get an idea of how steel quotas can gum up the works, bringing construction projects for new chemical plants and pipelines to a screeching halt.
In contrast, the free flow of goods, including steel and energy products, with our trading partners in Canada and Mexico is the foundation for so much economic activity and the gateway to greater growth fueled by energy development. The U.S.-Mexico-Canada Agreement is a win-win-win for agriculture, manufacturing and U.S. energy leadership. Congress should approve the agreement without tariffs or quotas.
Dr. Aaron Padilla is the American Petroleum Institute’s Senior Advisor for International Policy.
