EnergyFactor By ExxonMobil | Pespectives has a new home

Do DOE delays violate WTO obligations while hurting American companies?

The White House website states that the administration is dedicated to free trade and “has fought at the World Trade Organization to keep markets open for U.S. exporters.” Moreover, last year the White House established a new Interagency Trade Enforcement Center “to more aggressively address unfair trade practices.”

But former WTO official James Bacchus has pointed out one area of unfair trade practices that could use some attention – and it is sitting right in front of Obama administration officials.

Bacchus issued a report last week that should prove very important to the ongoing debate about energy exports and global trade.

As the former chairman of the WTO’s appellate body, he was enlisted by the National Association of Manufacturers to look at the regulatory and permitting regime for proposals to export energy products such as liquefied natural gas (LNG) and coal.

He didn’t like what he saw.

His report cites what he says are “unreasonable delays” by the U.S. Department of Energy (DOE) in processing LNG export applications. I should point out that one of those applications was submitted by a joint partnership that includes ExxonMobil.

“May constitute export restrictions”

Furthermore, he writes, these “lengthy delays in issuing export licenses or export approvals may constitute export restrictions.” It’s worth noting the Peterson Institute, the Manhattan Institute, and others have explored similar arguments.

Of course, export restrictions are not permitted by the WTO under the General Agreement on Tariffs and Trade, except in a very few instances. Bacchus determined that none of those exceptions is likely to apply to DOE’s exceedingly and unreasonably slow approach to processing its current backlog of LNG export applications.

Violating our international treaty obligations is concerning, especially when government officials routinely – and correctly – encourage other nations to open their markets and embrace the free flow of goods and services.

Bacchus warns that a consequence of the government’s policy of delay on LNG permitting is that it might encourage other nations to walk away from the core principles of free trade that have been critical to the United States’ economic success in the global economy.

What makes the administration’s delay worse, at least in the case of LNG, is that it translates into real economic costs for American companies. As Bacchus notes, many are worried “that certain projects may be delayed beyond the window of economic opportunity. The concern is heightened by new and planned export terminals in Canada, Australia, and Africa, all of which will compete with the United States for Asian markets.”

Fixing the problem before it goes to the WTO

Bacchus makes clear that any DOE attempts to justify its delays would have a tough time winning before WTO jurists.

Rather than let it get to that point, this seems a perfect opportunity for the new Interagency Trade Enforcement Center (ITEC) that the Obama administration established last year to spring into action and make a difference for U.S. exporters, U.S. workers, and the U.S. economy.

The ITEC is the federal government’s primary coordinator of international and domestic trade enforcement. According to its website, it “uses expertise from across the federal government to assert U.S. trade rights obtained through various international trade agreements.” Or in more muscular language, “ITEC is charged with fighting for American workers, farmers, ranchers, and businesses … [by] addressing unfair trade practices around the world.”

Asserting trade rights for the nearly two dozen American companies trapped in LNG application limbo is exactly what’s needed.

The irony – and the shame – is that the entity that is arguably abridging those rights is the U.S. government.

  • Worth a deeper look...