Deal headed to Congress keeps energy investor protections

Source: Geof Koss, E&E News reporter • Posted: Wednesday, August 29, 2018

The Trump administration said yesterday that a key investor dispute mechanism for the energy sector would remain in place in an upcoming bilateral trade deal with Mexico.

The White House, however, said the provision would be scaled back from what’s currently part of the North American Free Trade Agreement, and lawmakers are keen on many more details.

Speaking to reporters yesterday after the president announced he had struck a preliminary trade deal with Mexico, top White House officials said NAFTA’s investor-state dispute settlement (ISDS) provisions would remain for companies with Mexican government contracts for certain sectors, including oil and gas, infrastructure, energy generation, and telecommunications.

“For those companies, there’s no change in ISDS,” a senior administration official said. “They continue to have the full suite of ISDS protections that they enjoy under NAFTA 1.0.”

However, the ISDS provisions of the new U.S.-Mexico deal will otherwise be limited to cases of expropriation or for “national failure” to observe most-favored-nation status in trade issues, the aide said.

Retaining the existing ISDS process has been a top priority for the energy industry and other sectors, whose leaders argue it protects their interests abroad.

More than a hundred Republican lawmakers earlier this year signed a letter supporting the retention of ISDS in the ongoing talks to renegotiate NAFTA, and U.S. Trade Representative Robert Lighthizer — who has criticized the trade tribunals — got an earful over the issue when he testified on the Hill earlier this year (E&E Daily, March 22).

The White House did not offer additional details yesterday on how the new U.S.-Mexico deal would otherwise affect energy trade between the two nations.

The American Petroleum Institute, which has highlighted the importance of the ISDS provisions to its members, yesterday said only that it was “encouraged” by the preliminary agreement between the two nations.

The administration said yesterday it has also retreated somewhat from another disputed position that has drawn flak on Capitol Hill: its preference for a five-year sunset provision.

Instead, the bilateral deal with Mexico that the White House hopes to finalize later this year will include an “alternative to sunset” that would assign a 16-year lease on the deal that would automatically be reviewed every six years.

“We would have a review after six years where we would hope to work out problems, and then at the end of that review we would expect that that agreement would be extended for another 16 years,” said the official, who noted the provision “would keep modernizing on track and keep disputes from festering.”

‘Please share details with Congress’

While the administration appears to have heeded congressional critics on these issues, lawmakers yesterday signaled they want to see and hear far more from the White House on its trade plans.

Rep. Don Beyer (D-Va.) took to Twitter yesterday with a plea for more information. “Does anyone understand what the President is doing with NAFTA?” he tweeted. “If so please share details with Congress; he isn’t making any sense right now.”

Part of the confusion stems from the president’s announcement he was “terminating” NAFTA to pursue a bilateral deal with Mexico, which the administration hopes Canada will eventually enter into (Greenwire, Aug. 27).

White House officials told reporters it will notify Congress on Friday that it plans to finalize a deal with Mexico, meeting a requirement in a 2015 fast-track trade law that it give lawmakers 90 days’ advance notice before it signs such a deal.

On yesterday’s call, the administration official downplayed questions about whether the bilateral deal it plans to sign with Mexico passes legal muster, given that the administration last year notified the Hill of plans to renegotiate NAFTA — a trilateral deal.

“Ideally we’ll have the Canadians involved,” the official said. “If we don’t have the Canadians involved, then we will notify that we have a bilateral agreement that Canada is welcome to join, and we think that satisfies the requirements of the statute.”

Congress must still approve any trade deal, and top GOP lawmakers yesterday made clear they want that agreement to include Canada.

“This is a positive step, and now we need to ensure the final agreement brings Canada in to the fold and has bipartisan support,” Senate Majority Whip John Cornyn (R-Texas) said in a statement.

“A trilateral agreement is the best path forward, and any modernized agreement should do no harm to states like Texas whose economy has seen the benefits of cross-border commerce,” he said.

Senate Finance Chairman Orrin Hatch (R-Utah) and House Ways and Means Chairman Kevin Brady (R-Texas) — whose committees have jurisdiction over trade — both indicated they want to see Canada be part of the deal.

Brady further said he plans to consult with his colleagues to determine “whether the new proposal meets the trade priorities set out by Congress under Trade Promotion Authority.”

Other lawmakers echoed the calls for more information, including Rep. Henry Cuellar of Texas, an oil-patch Democrat, who said yesterday he wants a detailed briefing from the administration on the U.S.-Mexico deal.

“Although this deal is a step in the right direction, there is still a lot of work to do before Congress votes on this agreement,” Cuellar said in a statement. “Canada still must agree to U.S.-Mexico agreements that affect their interests, and there is significant trilateral ground to cover.”

Nebraska GOP Sen. Ben Sasse said, “I am working through the details of the possible U.S.-Mexico agreement, but there is reason to worry that this might be a step backward from NAFTA for American families — especially on fundamental issues of presumed expiration of the deal, and empowering government bureaucrats rather than markets to determine the components in cars and other goods.”

A spokesman for the Canadian government told E&E News that Foreign Minister Chrystia Freeland would travel to Washington, D.C., for talks now that the U.S. and Mexico have made progress.

“We will only sign a new NAFTA that is good for Canada and good for the middle class,” said Adam Austen, press secretary for Canada’s foreign minister. “Canada’s signature is required.”

‘Enforceable’ environmental, labor provisions

Although details about the preliminary deal were scant yesterday, a U.S. trade representative fact sheet said the U.S. and Mexico had agreed to “the most advanced, most comprehensive, highest standard chapter on the environment of any trade agreement,” which it touts as “enforceable.”

It includes obligations to fight wildlife, timber and fish trafficking, and to address “pressing environmental issues such as air quality and marine litter.”

The USTR touted prohibitions on “harmful fisheries subsidies”; new protections for marine species, including whales and sea turtles; and a prohibition on shark-finning. The deal will also support “sustainable forest management and ensure appropriate procedures for environmental impact assessments.”

The Sierra Club was unimpressed, criticizing the “rushed secret NAFTA deal.”

“All we know from these backroom talks is that Trump plans to replace a failed trade deal with one that weakens environmental standards and continues to allow corporations to outsource jobs and pollution to Mexico, harming communities on both sides of the border,” Executive Director Michael Brune said in a statement.

“If this deal moves forward as is, it will exacerbate — not relieve — NAFTA’s decades of damage to North America’s communities,” Brune said.

The White House official also told reporters yesterday that he was “optimistic” the deal would win bipartisan support, citing the “enforceable” labor provisions he called unprecedented.

“I believe there has never been a trade agreement remotely as good on labor from the point of view of organized labor and Democrats for whom that’s a high priority than this one,” said the official.

Reporters Peter Behr and Hannah Northey contributed.