America’s Energy Advantage Dodges the Question

America’s Energy Advantage has responded to my July 1 post criticizing its stance on the Domestic Prosperity and Global Freedom Act. That bill would liberalize liquefied natural gas (LNG) exports, while AEA opposes such exports because they would supposedly raise the raise the price of the LNG used by AEA’s members. 

As CEI has pointed out in the past, AEA is trying to use bureaucratic obstacles to restrict what companies can do with their products—an approach antithetical to free markets. 

What’s ironic is that, in its response to my post, AEA relies on a study that actually demonstrates the broad beneficial effects of exports. This study is the NERA’s Macroeconomic Impacts of LNG Exports from the United States. AEA claims that, despite being a pro-export study, the NERA study actually enforces their view, that LNG exports should be limited. According to AEA, “Once one looks beyond the surface-level conclusion “exports provide net benefits to the U.S. economy,” at winners and losers…the NERA report shows that the “losers” in this scenario are ALL other sectors of the U.S. economy and consumers, while the “winners” are producers and exporters of LNG.”

But this is simply not backed up by the NERA’s report. It states: “All export scenarios are welfare-improving for U.S. consumers. The welfare improvement is the largest under the high export scenarios even though the changes in U.S. natural gas prices are also the largest.”(p.84). Thus, the study clearly shows consumers will be made better-off by increased exports. Unless AEA is operating under a very bizarre definition of “loser,” they are blatantly mischaracterizing the NERA.

This is not a result that should surprise anyone. From Adam Smith onwards, economists have concluded time and time again that free trade is welfare-improving for both nations involved. AEA is well aware of this, and so claims to not be anti-trade but for “rules-based free-trade.” This is an empty phrase which AEA uses as a stand-in for its preferred policy of “ free trade for me but for thee”—essentially, there should be free trade, except for LNG, because that would hurt AEA’s members in the short term. This is the “principle” that underlies their refusal to take up my challenge to them in my original post.

It is possible, however, that I’m wrong and that “rules-based free trade” is a principle that AEA really believes should apply not only to its members, but across all markets. And so I invite them, once again, to prove this by accepting my sincerity-test challenge: get your members to stop exporting their own goods, which other manufacturers rely on, in the interest of “helping” American producers. If instituting “rules-based free trade” in these sectors improves the American economy, in defiance of everything economics teaches, then I will recant my opposition and begin eagerly championing trade restrictions.