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API: Additional Tariffs Hurt Oil and Gas Industry

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By MarEx 2018-08-21 18:27:00

The American Petroleum Institute (API) has emphasized urged the U.S. Administration not to impose additional tariffs on Chinese products at a hearing before the U.S. Trade Representative on Section 301 on Tuesday. The hearing being undertaken this week is part of consideration for increasing tariffs introduced in July from 10 to 25 percent.  

The API points to counterproductive effects of Section 301 tariffs on America’s natural gas and oil sector and the damaging impact that Chinese retaliatory tariffs would have on U.S. LNG exports. 

“The U.S. is leading the world in the production and refining of natural gas and oil,” said API Director for Tax Policy Stephen Comstock. “Unfortunately, the current trade policies being pursued by this Administration run counter to enhancing our energy dominance throughout the world.

“China is currently the third largest importer of U.S. LNG and those export amounts have been increasing to match China’s rising demand for natural gas. The U.S. is one of the world’s main LNG suppliers, but other countries are capable of supplying China – including Australia, Qatar, Malaysia and Russia. This trade dynamic suggests that additional tariffs by the Chinese on U.S. LNG will hurt the U.S. more than it hurts China and naturally incentivize other LNG suppliers to fill this market.”

Comstock noted that the U.S. oil and gas industry relies on imports from China on many products listed under the additional proposed tariffs and that it has already suffered harm from the finalized tariffs already enacted by the Administration. The additional products include:
 
1. Natural barium sulfate, a mineral commonly used as a weighting agent for drilling fluids
2. Raw material and component parts used to support the U.S. manufacturing of oilfield surface and subsea production equipment such as taps, cocks, valves and a range of iron and steel products.

He said that he recognizes that there is a process companies could use to exclude their import from the tariff. “But we have had experience from the section 232 process that it is does not work efficiently.  There is an overall lack of transparency into the decision process or understanding of the metrics used to make such determinations. Companies seeking an exclusion are seldom given an opportunity to adequately rebut challenges or provide additional facts into the process.”  

This is consistent, he says, with the overall lack of adequate consultation with the U.S. natural gas and oil industry to determine unintended consequences of trade actions and the potential impact on U.S. investments, jobs and consumers. 

At the start of the hearing, U.S. Trade Representative Robert Lighthizer said: “The Trump Administration continues to urge China to stop its unfair practices, open its market and engage in true market competition. We have been very clear about the specific changes China should undertake. Regrettably, instead of changing its harmful behavior, China has illegally retaliated against U.S. workers, farmers, ranchers and businesses.

“The increase in the possible rate of the additional duty is intended to provide the Administration with additional options to encourage China to change its harmful policies and behavior and adopt policies that will lead to fairer markets and prosperity for all of our citizens.

“The United States has joined forces with like-minded partners around the world to address unfair trade practices such as forced technology transfer and intellectual property theft, and we remain ready to engage with China in negotiations that could resolve these and other problems detailed in our Section 301 report.”