The U.S.' withdrawal from the North American Free Trade Agreement (NAFTA) would hurt the energy sectors of member countries, London-based Capital Economics said Thursday.
The seventh round of NAFTA talks concluded this week, in which an agreement was reached on only six of the 30 chapters, as 'Canada and Mexico have generally taken a hard line, making few concessions to U.S. demands,' the economic research consultancy said in a report.
Although NAFTA currently does not cover energy, 'If the talks break down, both Mexico and Canada could start to feel nervous about their reliance on imports of U.S. energy,' the report showed.
The consultancy said Mexico's oil and natural gas production has been in decline in recent years, and the country has been importing these resources largely from the U.S.
In addition, due to inadequate investment in Mexico's refining sector, the country has been sending its crude oil to refineries in the U.S., and importing petroleum products in return.
'Together, Mexico and Canada account for around one-third of U.S. exports ... At the same time, the U.S. imports large volumes of Canadian crude to mix with its lighter fuels,' the report said.
The U.S.' possible withdrawal from NAFTA, coupled with President Donald Trump's imposing tariffs on steel and aluminum imports, point the country towards 'a more isolated and protectionist' position, according to the report.
'If the U.S. were to withdraw from NAFTA and adopt a much more protectionist stance, this could lead to a reduction in growth in global trade, which would weigh on demand for oil,' it said.
'Given the scale of integration in the North American energy market -- including infrastructure such as pipelines -- it does not appear in any party’s interest to disrupt the existing arrangements,' it warned.
By Ovunc Kutlu in Houston
Anadolu Agency
energy@aa.com.tr