Texas led the nation in the volume of exports last year for the second time in history, edging out California once again for the top spot. The total value of Texas exports climbed $3.5 billion from the 2002 level to reach $98.85 billion. That’s nearly 14% of the US total. Mexico and Canada were our top two trading partners by a wide margin. Business with Mexico totaled nearly $41.6 billion, 42% of the total Texas trade. Commerce with Canada added another $10.8 billion. While Canada is certainly an important market, Mexico is obviously the key to the growth in Texas exports.
The inter-related nature of the economies of the US and Mexico is beyond question. This trade activity represents a crucial source of business activity for virtually all regions of the US. Strong cultural and familial ties link Mexico with the US border region and beyond. The flow of goods and people is vital to the ongoing economic health of families, corporations, cities, regions, and states.
Trade with Mexico has risen markedly over the past decade. Since NAFTA was implemented in 1994, US export volumes with Mexico have grown some 91.7% from $50.8 billion in 1994 to $97.5 billion in 2003. Although sluggish economic conditions and security issues dampened the pace of growth recently, expanded trade is again being observed and, assuming no major disruptions of border traffic, is expected to continue and accelerate for the foreseeable future.
Over the past 12 years, the volume of Texas exports to Mexico has almost tripled. Key export goods include computers and electronic equipment, chemicals, nonelectrical machinery, transportation equipment, petroleum and coal products, electrical equipment, appliances and parts, fabricated metal products, processed foods, agricultural production, and plastics and rubber products.
One reason for this rapid growth is activity linked to maquiladoras. According to a report by the El Paso Branch of the Federal Reserve Bank of Dallas in 2001, there were 3,735 maquiladora plants employing almost 1.3 million people. These plants have been crucial in the reorientation of the Mexican economy toward growth through export production. Over the past two decades, the share of international trade in Mexico’s gross domestic product has grown substantially.
While these operations are clearly vital to the Mexican economy, they are also critical to firms on the US side. One such example is the Delphi Company. A spokesperson for Delphi has been quoted as explaining that some 70,000 workers in Mexico support 700,000 American workers in US plants. Without the ability to efficiently utilize Mexican facilities and laborers to contain costs, the company might be forced to move these jobs offshore. With the implementation of NAFTA, integrated production has extended well beyond the immediate border region.
Yet another aspect of the importance of Mexico to Texas is spending by Mexicans in the border region and beyond. Thousands of Mexicans cross the border into the US every day to shop in retail outlets in the US. Other Mexicans cross into the US to work (and legally stay). The magnitude of the US workforce comprised of Mexican citizens is a further indication of the symbiotic relationship between the two countries. Mexicans represent an important source of labor, particularly in certain industries.
Interaction with our neighbor to the south is one of the primary drivers of economic growth in many areas of Texas. The flow of goods and people across the border results in substantial gains for both nations. Trade-related activity is, in fact, one of the most crucial elements of any growing economy.