USMCA and Latin American Energy Diplomacy Under a New US Congress

Institute of the Americas

November’s midterm elections altered the balance of power in Washington, and the new Democratic majority in the House of Representatives, which will mean new chairs on key committees, will play an important role in shaping US energy diplomacy and energy markets in the Western Hemisphere. At an event co-hosted by the Inter-American Dialogue and the Institute of the Americas, panelists discussed how the new Congress will approach key issues affecting energy within the context of Latin America’s evolving role in US trade and foreign policy.

In his keynote remarks, Nelson Cunningham, president of McLarty Associates, stressed that the approval of the United States Mexico Canada Agreement (USMCA) will take center stage as the new Congress assumes power, with major consequences for North American trade. Though the Democratic base has become increasingly pro-trade, Speaker-designate Nancy Pelosi and House Democrats may be reluctant to yield a major political win to President Donald Trump, and Pelosi could attempt to stall a vote on the deal as she did with the Colombia Free Trade Agreement in 2008.

At least publicly, Democratic leaders have expressed their desire to work with the president on reaching an agreement, which could deliver some minor improvements over the original North American Free Trade Agreement (NAFTA), but they have concerns about elements related to labor and the environment, as well as about the deal’s overall enforceability, panelists noted. It remains to be seen whether the president is willing to negotiate or will resort immediately to his nuclear option: a unilateral withdrawal from NAFTA, which would leave Democrats with six months to decide between the USMCA and the grim alternative of no free trade deal at all. All parties would lose in North America’s highly integrated energy industry, including US refiners and gas producers that import crude oil, steel, and aluminum from both neighboring countries and export heavily to Mexico.

Beyond trade, Congress also has broad powers in global energy diplomacy. The House has important influence on areas such as foreign aid, tax policy, and natural gas exports. Panelists discussed strategic goals the new Congress can pursue next year, such as preventing oil from becoming part of conflicts in the region and reinforcing political stability and good governance. In particular, two new committee chairs will shoulder special responsibility in setting the agenda. Representative Eliot Engel, who will take the helm as chair of the House Foreign Affairs Committee, brings a strong track record in US-Latin America engagement, having previously chaired the Western Hemisphere Subcommittee. Representative Albio Sires will assume the top role on that subcommittee, and will emphasize his tough stance on Venezuela and on Cuba, where he was born. Closer cooperation on energy in the hemisphere will benefit both the US and Latin American partners, and in the current complex political environment, the new Congress should resolve not to let it fall by the wayside.

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