There has been animated discussion and various economic studies published by interested parties as to whether the U.S. should allow for free exports of liquefied natural gas (LNG). The oil and gas industry has come out deeply in favor of unfettered exports, citing reports that signify the amount of GDP growth and jobs added if this were to take place. The fact that this will also increase their profits significantly is not lost on their detractors.
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Local industry, including manufacturing, petrochemicals and fertilizers, as well as left-leaning pundits, have called for a restriction of LNG exports to keep the historically low-priced natural gas at home to rebuild a decimated industrial sector. So far, the Department of Energy has provided non-free-trade agreement trade approval to four proposed LNG plants that allows them to export LNG to even those nations without a free-trade agreement with the U.S., and more approvals are expected before the end of the year.
However, lost in this whole discussion between export and domestically-focused advocacy, is the role this large natural-gas resource can play for the U.S. in ongoing and future trade negotiations. The largest importers of LNG are Japan and South Korea, with India, China, the UK and Spain not far behind. While South Korea already has a free trade agreement with the U.S., these other countries do not.
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Japan belatedly joined the Trans-Pacific Partnership negotiations this July and while the exact reasoning is still under speculation, it cannot be overstated that the lure of cheap U.S. sources of natural gas, specifically after Japan's nuclear disaster following a tsunami in March 2011, probably played a large role in this decision.
Now that Japan is at the negotiating table, the added incentive of free natural-gas exports — for which the Japanese paid almost $20/per million British Thermal Units (MMBtu) vs. domestic U.S. prices around $3-3.5/MMBtu last winter) — can be used to bring tariff barriers around "sensitive" industries like agriculture and automotives to the negotiating table. Similarly negotiations for the Trans-Atlantic Free Trade Area, which have moved at a snail's pace, could be pushed forward.