Transition

Trade consequences on tap if U.S. exits Paris

How are members of the World Energy Council reacting to President-elect Donald Trump's transition and possible actions on energy and climate? During today's OnPoint, Barry Worthington, executive director of the U.S. Energy Association and the U.S. representative in the World Energy Council, discusses his conversations with his international counterparts on the future of energy, trade and climate action. He also explains how he believes the U.S.-China relationship will develop under the Trump administration.

Transcript

Monica Trauzzi: Hello, and welcome to OnPoint. I'm Monica Trauzzi. With me today is Barry Worthington, executive director of the U.S. Energy Association. Barry, thank you for joining me.

Barry Worthington: Thank you for having me. It's good to see you.

Monica Trauzzi: Good to see you as well. Barry, you represent the U.S. at the World Energy Council, and you can provide a unique perspective on what some of the international conversations are specific to energy relating to the incoming Trump administration. What conversations have you had with your counterparts on the World Energy Council, and what is the sentiment sort of internationally as this new administration comes in?

Barry Worthington: Well, I think people in other countries, particularly Europe, who pay attention to U.S. elections were surprised as any of us at the outcome. They were getting the same information we all were, they were hearing the same polling information, and they were just very, very surprised. Additionally I think I would say that, while we don't have a full understanding yet exactly what to expect, they have even less of an understanding of what to expect. And keep in mind, one of the things that's hugely different is the Europeans particularly generally operate parliamentary systems, and over the years, they've always been baffled when we've had an executive branch pronouncement and then Congress does something different because in their system, the government is the Parliament. And so there's great concern over the unknown.

Monica Trauzzi: With energy and climate being so interconnected, we've heard President-elect Trump suggest that he might want to exit the Paris Agreement. He's walked back some of his comments, or at least said that he would like to take a second look and give it a little more consideration, but if the U.S. were to pull out of the Paris Agreement or simply refuse to meet its target, how might that shake things up internationally and what have you heard internationally specific to the Paris Agreement?

Barry Worthington: Well, I think countries, and again, particularly Europeans because they're more concerned over climate issues than people from other continents, they would be very surprised because, again, they don't understand as clearly as we do the notion that you have one administration that can do one thing, Congress can do something else, the next administration, the next Congress can do something completely — completely different. I will say they see the Paris Agreement as a commitment of the United States. They don't see the Paris Agreement as a commitment of the Obama administration. And again, it's just their nature of looking at our set of governance versus what they're familiar with. So if there's a pullback, they would be very disappointed because, again, they would see it as a lack of commitment on the United States of America, not a lack of commitment from one administration versus the other.

Monica Trauzzi: And how might they react in response?

Barry Worthington: Well, it's difficult to say, and they're keeping their cards close to their vest. None of them are willing to talk about what their reaction might be. Their first reaction would be disbelief, but it certainly would have repercussions on other aspects of the United States-European relationship. It would be very much more difficult to get a favorable E.U.-U.S. trade agreement, for example. They would hold hostage a trade agreement if we renege on the Paris Agreement. Now, it's very possible that an E.U.-U.S. trade agreement's a bad idea anyway, like we've learned from other trade agreements, the devil's always in the detail, and until you can see exactly what the nuances are, it's very difficult to tell what the reaction would be. But, you know, we have diplomatic interests, we have national security interests, we have military interests, we have economic interests, we have trade interests with Europe. All of those are going to be affected if we pull out of the Paris Agreement. Now, having said that, let me also say though, from an industry standpoint, we're on path to meet the Paris commitments already. We've had emissions reductions in the energy sector of 18, 19 percent from 2005. We're continuing to reduce emissions. The automobile efficiency standards, the building efficiency standards, appliance standards, lighting standards are all going to contribute to driving our emissions down.

Monica Trauzzi: Which industries — are there industries within your association that are expressing great concern about some of the potential trade consequences that we might see develop?

Barry Worthington: Well, I think any corporation that's engaged in international trade, which is certainly the majority of our members, certainly our larger international companies, they're concerned, again, over the unknown. Now, Mr. Trump, though, is a negotiator and he may end up with things like a Trans-Pacific Partnership, a U.S.-E.U. agreement, even NAFTA. He may negotiate a better deal than what is on the table now. I think we have to take a little bit of a wait and see.

Monica Trauzzi: We spoke a lot about Europe, but the U.S.-China relationship that's evolved over the last few years has been very interesting and dynamic one to watch. President-elect Trump has had some harsh words for China. How do you view the relationship between the U.S. and China specific to energy and climate developing under the next administration?

Barry Worthington: Well, I think that if you look at the messages in the campaign, he was not so much critical of China as he was the prior administration dealing with China. He actually expressed admiration for Chinese negotiators. His view that he expressed was China was getting a better deal than the United States was, and he was committing to negotiate our relationship with China in such a way that it improved the outcomes for U.S. companies and for U.S. citizens. So I can't remember him being critical of China as a country as much as the relationship that we've gotten to with China.

Monica Trauzzi: So, but do you predict a willingness to work with China in a similar way that the Obama administration has?

Barry Worthington: I think that you're going to see it even in a way that benefits Americans more. He expressed that the largest bank in China has their U.S. headquarters in the Trump Tower. He's expressed admiration for Chinese leadership. He, I think, was — expressed admiration for their negotiating capability as opposed to the prior administration. So I spoke at the Tulane Law School a week ago, and I was asked specifically about the Trump administration's trade dealings with China, and I said if we convene here in four years' time, I think you're going to find that there's a better relationship between China and the United States in four years than what there is now, and a relationship that benefits both parties.

Monica Trauzzi: How can investments in Mexico be impacted, not only with potential changes to immigration policy but also changes on trade that we might see coming?

Barry Worthington: Well, that's a really good question because, you know, we have NAFTA in place. NAFTA has a provision that governs energy trade and investment in the energy sector between Mexico and China. Mexico is, for the first time, appearing more and more open for foreign investment. And those investment decisions are made by the U.S. private sector, not the U.S. government. Mexico, in the energy sector particularly, they need our capital, they need our technology, they need our know-how, and I don't think that the Mexican government will allow political rhetoric to get in the way of doing what's best for Mexico.

Monica Trauzzi: Want to get one final question in. You have been in touch with the Trump transition team. In your view, is there clarity on a specific direction this administration will take on energy matters here in the U.S.? We've heard a lot about coal, we've heard a lot about oil and gas development. Is there more clarity on where this is going?

Barry Worthington: I think what you're going to see is a significant loosening of regulation, and what that's going to do, it's going to allow all the energy sources, all the fuels to compete on a more even playing field. And, you know, U.S. Energy Association is certainly market-focused. We think the market should make decisions regarding fuels, regarding selection of technology. Let's level the playing field and have everybody go at it in the marketplace.

Monica Trauzzi: So not a giant influx heading back to coal.

Barry Worthington: Well, coal has to get there on a market basis, and can they do things that reduce costs? Yes, you're seeing cost reductions. Three out of the four largest coal producers went through bankruptcy. They've significantly reduced their costs in that process. We're exporting coal right now. With some changes in environmental regulations, we can export more coal than what we are now. So I think coal has a bright future. I don't think we're going to build a whole slew of new coal plants anytime soon. And again, to the degree that we can, let's have that be a market-based decision.

Monica Trauzzi: All right. We will end it right there. Thank you so much for your thoughts.

Barry Worthington: Thank you.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]

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