As many of you know, my firm is in the midst of a pro bono economic development analysis for Texas and its regions. It is part of a mandate (unfunded) from the legislature to the Texas Department of Economic Development. It has been and continues to be a fascinating experience.
Even after more than 20 years, number junkies like me enjoy new insights into our great state and how it all hangs together. It also gives me a chance to talk to a bunch of people about Texas, something I do all the time anyway. I learned a long time ago that what people say is at least as important as what numbers tell me, but you can’t ignore the cold, hard facts in black and white.
My latest foray is to develop detailed net export numbers for the state by industrial category. These numbers tell us which goods and services we produce more of in Texas than we need, leaving us something to export. They also identify the categories where we use more than we produce (we’re net importers). This analysis provides useful insights into both current strengths and potential opportunities. I am in the process of deriving similar measures for other states and all of the metropolitan areas and planning regions in Texas. The resulting comparisons will tell us even more, but the numbers themselves are quite enlightening in their own right.
Texas industries with net export potential send about $90.1 billion per year in net goods and services out of the state (thus bringing money in), or about 15% of private sector gross state product (in constant 1996 dollars). Over 40% of this total is in oil and gas extraction, indicating that much more diversification in our export base can still be accomplished.
About $7.8 billion is in distribution, a number that has been enhanced by the reforms in trucking regulation a few years ago and which can be further stimulated by specific policy initiatives in the future. About $11.8 billion in net exports occur in manufacturing. This total is spread over a relatively narrow range of industrial sectors, including chemicals, petroleum refining, leather products (a small amount in absolute terms), and electronics. We are close in a few other areas, but not quite there.
Texas is also a net exporter of transportation (particularly air, pipelines, and transportation services), communication services, and utility services (primarily natural gas). These findings bode well for us as a center of activity and a viable location for business activity, particularly when combined with the surplus in distribution.
There are, however, some obvious difficulties as well. While Texas is a net exporter of agricultural products, we are a net importer of both agricultural services and food processing. These shortfalls represent billions of dollars in output each year which would accrue to the benefit of rural Texas. We are also net exporters of hotel and lodging services and amusements. Thus, while tourism is big in Texas, on balance we appear to be spending more elsewhere more than we’re getting back. There are also several categories of manufacturing where we have opportunities for improvement, including metal fabrication, machinery, transportation equipment, and instruments. Despite some major centers of activity, we are a net importer of medical services (though, for better or worse, our lawyers are net exporters).
It should also be noted that individual areas exhibit different characteristics than the state as a whole. Austin, for example, is a large exporter of machinery (primarily computers), but imports its oil and food. Amarillo and Abilene are net exporters of both agricultural services and food processing, thus exhibiting some success in the value added opportunities from farming and ranching. (I am doing the urban areas in alphabetical order and have thus far only made it through the “A’s.” I’m sure I’ll have more to offer later.)
In short, these new numbers tell us that we are doing well in many areas, but can do much better in others. The export production from our net export industries contributes more than 500,000 high-paying jobs to the Texas economy, with average wages about 75% above the norm. By pinpointing the successes and failures by geographic regions, we can begin to formulate more effective strategies at the state and local levels for future prosperity.