Modernizing NAFTA a potential boon to energy and economic prosperity

San Diego is a successful example of what can be achieved when countries collaborate. Our binational region has been recognized for helping to improve the innovation economy, attracting new investments and strengthening cross-border infrastructure. Central to these achievements has been the North American Free Trade Agreement (NAFTA), which has made it easier for companies to do business on both sides of the border.

In Washington D.C., federal lawmakers currently are working to modernize this landmark agreement, which could unleash new economic opportunities for the U.S., Mexico and Canada.

Earlier this week, I testified before congressional leadership about the importance of maintaining existing benefits of NAFTA, as well as making amendments that reflect changes in today’s global market. From an energy perspective, NAFTA has been a big plus for the U.S., helping to create a robust and integrated North American energy market that supports U.S. jobs, strengthens our energy security and protect the environment.

IEnova, a Sempra Energy operating subsidiary, now ranks as one of the largest private energy companies in Mexico with more than $7 billion in assets. IEnova’s footprint in Mexico spans several lines of business: natural gas transportation, distribution and storage; electricity generation (natural gas, wind and solar); and liquids storage and transportation.

Energy investments in Mexico are generating tens of thousands of new well-paying jobs on both sides of the border for engineers, operators, accountants, IT professionals and others. Providing energy to Mexico involves a lengthy and complicated supply chain that is growing and supporting hundreds of thousands of jobs in the U.S. associated with the production and transportation of natural gas and liquid fuels to the border.

Developing new infrastructure for cleaner energy also is helping Mexico reduce greenhouse gas emissions and improve the environment.

The opportunities created by the global energy market have contributed to an energy trade surplus for the U.S. Our nation’s trade with Mexico and Canada in energy commodities, including electricity, liquid fuels and natural gas, exceeds $140 billion annually. In fact, last year, the U.S. enjoyed a trade surplus in energy commodities with Mexico of more than $11 billion, with more than $20 billion in U.S. exports to Mexico and less than $9 billion in U.S. imports from Mexico.

And, we are just beginning to tap the potential of U.S.-Mexican energy trade. Mexico expects a doubling in its natural gas imports in just the next five years and in its per capita electricity consumption during the next 25 years.

In addition to maintaining the existing benefits, our leaders have an opportunity to improve NAFTA in ways that expand trade and investment:

• First, NAFTA should reflect today’s market openness. When NAFTA was negotiated in the early 1990s, much of the Mexican energy sector was effectively closed to U.S. and other foreign companies. In 2013, however, Mexico amended its constitution and enacted legislation to reform the energy sector and increase foreign investment;

• Second, we should maintain the Investor-State Dispute Settlement (ISDS) to protect our investments in foreign lands and further expand it. Essentially, maintaining ISDS levels the playing field for U.S. businesses. It provides U.S. investors with same rights in foreign markets that foreign investors enjoy in the U.S. under federal law; and

• Third, NAFTA should be modernized by increasing regulatory coordination in the energy sector, particularly with respect to the cross-border infrastructure development process.

If our federal lawmakers can preserve NAFTA’s existing benefits, while updating it to reflect changing market conditions, this critical trade agreement has the potential to increase economic growth on both sides of the border, improving the environment and providing a boost to border cities like San Diego. A growing U.S.-Mexican energy trade partnership is a win-win-win proposition for both countries: for our economies, our communities and our environment.

Arriola is executive vice president, corporate strategy and external affairs, for Sempra Energy.

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