Tomorrow the United States will make a critical foreign and economic policy decision. Monday is the deadline for a Commerce Department decision to permit petitions to impose anti-dumping penalties on oil imports from Mexico, Venezuela and Saudi Arabia. Such a decision would damage our relations with key allies, increase energy costs for U.S. consumers and provide little real help to those who filed the complaint.
This is one of the biggest dumping cases ever filed. Its ultimate consequences could be punitive tariffs and penalties on oil imports that would substantially raise energy costs to consumers. Even if such penalties ultimately are not imposed, the process would be so rancorous as to cause great damage to U.S. foreign and economic policy.
In filing their complaint, a group of independent U.S. oil producers argue that foreign oil suppliers "dumped" crude oil in U.S. markets at prices below production costs or home market prices. There is no question that record low oil prices over the past two years have severely hurt U.S. producers and oil workers. With many years of experience in the energy industry, we know how hard depressed prices hit independent companies -- many of them family-owned -- and workers and their families.
As with other commodity industries harmed by the Asian financial crisis, we support relief to those affected by last year's historically low prices. But U.S. anti-dumping law is a very blunt instrument that can also badly hurt vital U.S. economic and security interests. Trade wars benefit few and harm many. Instead of advancing a highly technical trade dispute, the administration and Congress should work with the domestic industry on a package of measures such as those advanced by U.S. Energy Secretary Bill Richardson and key members of Congress. Alternative Minimum Tax relief, royalty relief, increased technical assistance and reduction of heavy regulatory burdens can strengthen independent oil producers without weakening our position in the world. The United States must get serious about our domestic industry.
A strong domestic oil industry is an essential component of national security. But the United States simply cannot meet all its energy needs on its own. Currently we import over half of our oil needs, and the dumping petition targets three of our top four energy suppliers, who provide half of those imports. Saudi Arabia, which supported the United States in the Gulf War and Bosnia peacekeeping missions, is a vital part of U.S. national security, and the stability of its supplies is critical to the world economy. Venezuela shares top billing with Saudi Arabia as the United States' largest oil supplier, and it can be an important counterweight to drug trafficking and guerrilla movements in South America. With NAFTA, Mexico is now the United States' second-largest trading partner -- ahead of Japan. Mexico is also an indispensable partner in the fight against illegal immigration, environmental degradation and illegal narcotics.
The dumping case also risks damaging U.S. participation in the remarkable energy integration taking place in Latin America. Almost every country has opened its energy sector to international investment. U.S. electric power and natural gas companies, along with U.S. major and independent oil companies, are at the forefront in developing the better-quality and more environmentally sound energy resources that the hemisphere needs. For instance, after decades of strife in Central America, U.S. companies are working with local firms and governments to provide reliable electricity across borders known more for political conflict than peaceful cooperation.
This fusion of energy interests is driving political and economic integration in the Western Hemisphere and benefiting U.S. consumers, companies and security interests. Yet many abroad view the U.S. dumping case as a return to old-fashioned Yankee imperialism. The case already is stirring political passions and reactions in these countries, and it could even affect the presidential campaign that has now begun in Mexico. Indeed, Mexico has already responded by suspending a planned elimination of tariffs on U.S. natural gas.
If the United States wants to reap the benefits of energy integration, we must be a committed player. We have a strong interest in good relations with Mexico, Saudi Arabia and Venezuela. The United States must take the lead in finding a swift, acceptable resolution.
Mack McLarty, a former natural-gas company CEO, was President Clinton's chief of staff and special envoy for the Americas. Daniel Yergin is chairman of Cambridge Energy Research Associates.