The Case Against Banning U.S. Exports of Liquified Natural Gas to China

The 118th Congress is working at a fever pitch to find ways to economically punish China.

With headline-grabbing titles like Fair Trade with China Enforcement Act, Ending China’s Developing Nation Status Act, and Neutralizing Unfair Chinese Export Subsidies Act of 2023, a flurry of bills in both the House and Senate seek to impose costs on China for its coercive economic and national security policies. Many of these bills are a step in the right direction. Others are simply political theatre. While bashing China is undoubtedly in vogue, the costs and benefits of these bills need serious scrutiny. Good intentions can backfire; these bills might hurt the US more than China.

Take, for example, the China Oil Export Prohibition Act of 2023. Penned by Senator Marco Rubio, the bill calls for banning US exports of oil products to China. It follows on the heels of the Protecting America’s Strategic Petroleum Reserve from China Act, which forbids the drawdown of US strategic oil reserves for sale to China. The latter will do little to hurt China, which accounts for just 7.5 of the 296 million barrels of Strategic Petroleum Reserve Washington put up for sale. In any case, that window has closed. Rubio’s bill, which one study says has a 20 percent chance of passing, lacks support from Democrats, yet could pick up steam in the wake of China’s balloon incident.

What’s important about Rubio’s bill is that it excludes natural gas and liquified natural gas (LNG). But this might change for several reasons, not all of which are about Beijing. For example, a ban on LNG exports to China could complement the Democrats’ push to move away natural gas.

Still, banning LNG exports to China would be a mistake. It would amount to the expropriation of US assets dedicated to fulfilling contracts with China, and force Beijing closer to Moscow.

In 2021, China imported more LNG than any other country. That year saw U.S. LNG exports to China reach an all-time-high of 400,000 million cubic feet. By 2022, this figure had plunged to 100,000 cubic feet, in part due to political uncertainty about the prospect of future sales. This puts American jobs on the line. It also positions Russia, as China’s third-largest supplier of natural gas, to pick up the slack.

In an essay titled “How Congress Can Protect Americans from Communist China’s Bid for Domination,” Rubio explains that “[f]irst and foremost, we need to prevent markets from enriching Beijing-controlled firms.” To this end, he’s sponsored no fewer than eight bills taking aim at China, covering everything from corporate corruption to “fair trade” and investment in companies on the US government’s blacklists. No one can excuse Rubio of “being soft” on China.

That said, Rubio’s China Oil Export Prohibition Act of 2023 would do far more harm than good for the United States if LNG were to be included in a subsequent draft, or in a related bill.

In his remarks on the twenty-year anniversary of China joining the World Trade Organization, Rubio said that U.S. approval “was rooted in a flawed assumption” that put “economic integration” over “our national security.” This view is also held by the Industrial Energy Consumers of America (IECA), which asked the Senate’s Select Committee on Intelligence to “examine the national and economic security implications of China’s actions to contract for significant volume of US LNG for periods of up to 20 years.” But this national security argument doesn’t hold water.

That’s because, as the IECA further notes, China is “also locking up large volumes of LNG from Russia, Australia and Qatar.” That’s the point: if the United States were to ban LNG exports to China, Russia would make up the difference, solidifying an alliance that is a growing threat to U.S. national security.

The implication of Rubio’s bill is that an export ban, like “our national security,” can’t be viewed in a vacuum. The global economy is replete with trade partners. A ban on U.S. LNG exports would only imperil good American jobs and investments, and deepen China’s alliance with Russia.

Source: Nationalinterest.org

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The post The Case Against Banning U.S. Exports of Liquified Natural Gas to China appeared first on Energy News Beat.

The Case Against Banning U.S. Exports of Liquified Natural Gas to China

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