North American Energy Markets Will Benefit From USMCA

November 7, 2018

After more than a year of intense negotiations, the United States, Canada and Mexico reached an agreement to update the North American Free Trade Agreement, the 1994 pact that governs more than $1.2 trillion worth of trade among the three nations.

The new deal won't go into effect right away as most of the key provisions don't start until 2020. Leaders from the three countries must sign it and then Congress and the legislatures in Canada and Mexico must approve it, a process that is expected to take months. If approved, the United States Mexico Canada Agreement (USMCA) stipulates that the three nations will review the agreement after six years. If all parties agree it's working then the deal will continue for the full 16-year period (with the ability to renew after that for an additional 16 years).

While details have not yet been released, the deal has significant changes for automakers, opens Canada's milk market to U.S. dairy farmers and maintains arbitration rules that many American companies hoped would be kept in place. The new trade pact reduces a dispute resolution provision for multinational companies operating in other countries but gives an exception for some sectors, including oil and natural gas.

So, what will the effects of the new agreement be on the energy market?

No Tariffs on Energy

USMCA ensures a "zero-tariff" on energy products traded between the United States, Mexico and Canada. These provisions allow the energy industry to continue expanding U.S. natural gas exports into Mexico without worrying about tariffs. Additionally, American refiners will still be able to tap some of the 3.3 million barrels of oil exported from Canada each day.

It also requires....  

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