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Timely 123 Agreements Key to Winning Nuclear Trade Deals, US Jobs

Dec. 12, 2013—Even though the United States was an early leader in commercial nuclear energy, it is at a disadvantage in competition with countries that impose fewer restrictions on international nuclear trade.

U.S. companies are increasingly finding themselves competing with companies from Russia, France, Japan and South Korea in nuclear energy technology and know-how.

In this new world, competition is fierce, and state-backed firms in other countries often have a big advantage.

“The state-owned entities can offer things vendors like Westinghouse can’t,” said Jeanne Lopatto, vice president of government and international affairs at Westinghouse. “They can bundle projects, they can throw in defense systems or other things that a vendor like Westinghouse can’t offer.”      

In such an environment, American companies need every advantage they can get with a minimum amount of bureaucratic obstacles. But the United States has not been nimble in supporting U.S. nuclear trade with new markets. Before U.S. nuclear suppliers can export nuclear technology or services, the United States and the destination country must negotiate and bring into force a bilateral “Section 123 agreement”—so-called for a nuclear trade provision in the Atomic Energy Act of 1953. In recent years, the U.S. government has been slow to negotiate new 123 agreements, allowing foreign competitors to get into new markets first.

A case in point is Vietnam, with which the United States first opened negotiations for a Section 123 agreement in 2010. While the talks stalled, Vietnam signed supply agreements with Russia and Japan for four nuclear power plants. U.S. and Vietnamese officials finally initialed an agreement this October, but U.S. vendors must remain on the sidelines until the agreement meets approval on Capitol Hill.

“Our competitors are not constrained by these [123] agreements and they’re getting a head start on us,” said Lopatto. “We can begin to discuss things in general, but the exchange of information regarding technology cannot be done. You can make a little bit of progress, but you can’t make a lot.” 

Lopatto said that having a congressionally approved Section 123 agreement in place with Vietnam would permit “more in-depth technical discussions” and potentially allow Westinghouse to sign business contracts.

Timely renewals of existing Section 123 agreements with countries that have been longtime partners in nuclear trade also are important. During the past two years, U.S. government inaction resulted in the expiration of agreements with Bangladesh, Peru and Colombia.

More commercially significant is an agreement with Taiwan that is scheduled to expire next June. Despite the importance of the Taiwan market, the United States has yet to submit a renewal U.S.-Taiwan Section 123 agreement to Congress. Due to the slow process for congressional approval, the agreement is now at risk of lapse.

“Without a [renewed] 123 agreement with Taiwan, we wouldn’t be able to continue providing fuel and services to several boiling water reactors and to two Advanced Boiling Water Reactors that are being completed right now,” said David Durham, senior vice president and chief commercial officer, GE Hitachi Nuclear Energy.

 

Workers on the GE Hitachi ABWR project under construction at Taiwan Power Co.’s Lungmen 1 & 2. Image courtesy Taiwan Power Co. and GE Hitachi.

 

When U.S. companies gain access to new markets or continue ties with existing markets the end result isn’t just new business deals, it is also new jobs at home.  

“Westinghouse signed a contract for four Chinese AP1000 reactors and that resulted in about 5,000 U.S. jobs in 20 states,” said Lopatto. “And by that, I mean good jobs: design and engineering jobs, manufacturing jobs.”  

Lopatto added that in a world with fierce global competition, if foreign customers think that bureaucratic obstacles will prevent them from getting what they want, they can simply go somewhere else.

“If it becomes too difficult for a country to deal with the United States, there are other options out there,” she said. “They can go to another vendor from South Korea or from Russia and get nuclear power.”