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January 16, 2013
The National Foreign Trade Council Re: LNG Exports

Thanks to the technological innovations brought to bear by the U.S. oil and gas sector, the United States now enjoys a renaissance in the production of crude oil and natural gas that can be “a game changer” for the U.S. economy and for employment in a variety of sectors. The sheer scope of the so-called “unconventional gas” domestic resource base has resulted in expanded domestic use in baseload power generation, notable investment in domestic manufacturing dependent on natural gas as an input and a correspondent build out of “midstream” – pipeline and processing – natural gas infrastructure that distinguishes the U.S. natural gas market. These developments bring great promise for our economy and our long-term goal of energy independence.

They have also become occasion for some debate over the wisdom of permitting exports of LNG. On that issue, like most, the National Foreign Trade Council prefers that the market, rather than the government, be the determining factor.
In addition, however, the issue of restrictions on exports of other commodities, particularly minerals and rare earths, is already being hotly debated internationally, and the United States has taken a very firm position bilaterally and in the WTO opposing restrictions on raw materials imposed by other nations, a position we have successfully advanced in WTO litigation against China. That was the right position to take from the standpoint of sound economics and sound trade policy.

If the United States were at this point to impose its own restrictions, we would undercut the very clear trade policy position we have taken at the WTO, compromise the WTO’s ability to build a common set of rules for the trading system and make it more difficult for us to obtain badly needed raw materials from other countries. The short and long-term consequences would be disastrous.

Over the longer term, LNG exports, despite the large capital investment required, are a logical consequence of the rapid development of domestic production capacity and will provide producers an appropriate market addition. That said, the domestic end-use of domestic natural gas production, given the unparalleled domestic infrastructure the U.S. enjoys, will continue to grow, provided that pricing is not artificially distorted by protectionist policies.

The NFTC urges the Administration to do no harm to the marketplace in its evaluation of LNG export proposals.
 
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By Bill Reinsch
Tags: NFTC, LNG Exports, WTO

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