08/19/2005: "New Trade Agreement Offers Positive Opportunities"
Throughout history, trade between countries has been a key factor in the health and vitality of their economies. For just about as long, nations have sought favorable relationships with others in order to enhance trading possibilities for the betterment of their own situations.
European exploration, especially during the 15th through 18th centuries, regularly led to the establishment of new markets and dramatically increased the numbers of available products. The various trade endeavors also led to the general enhancement and improvement of living conditions and lifestyles of the citizenries involved. In addition, the continual expansion of trade played a significant role in creating a commercial revolution.
The recent signing of the Central American Free Trade Agreement (CAFTA) has similar advantages as it removes virtually all tariffs and quota barriers and consolidates Central America’s preferential market access in the US.
The accord is expected to increase trade among all of its members and encourage greater foreign investment in the individual countries. The agreement also promises to help to improve economic growth and reduce poverty in Central America. CAFTA has the potential to benefit both the US and Texas. After the full phase-in of the agreement, US exports to the nations involved are expected to rise by about $2.7 billion.
Texas has trade relationships with more than 225 countries around the world and is among the leading states in the value of exports to the CAFTA nations. Last year, Texas ranked second in the total value of US exports to both Guatemala and Honduras, providing 19% and almost 16%, respectively. The state was also third in the percentage of all US products transported to Nicaragua at about 12% and the Dominican Republic with nearly 8%.
In 2004, the CAFTA nations accepted a total of $1.76 billion of Texas exports, the second highest quantity from all US states. This amount reflects a 98% increase of Texas products sold to the six countries in comparison to the 1999 total.
Over the five-year timeframe from 1999 to 2004, the aggregate value of Texas goods and services exported to the CAFTA signatories was nearly $7.83 billion. Guatemala received almost 27% of this total. The percentage shipped to the other Central American countries from Texas was: Honduras, 23%; Dominican Republic, 20%; Costa Rica, 14%; El Salvador, 12%; and Nicaragua, 4%.
Texas’ leading export products to the CAFTA nations in 2004 included chemical manufactures, petroleum and coal products, computers and electronic products, transportation equipment, processed foods, fabric mill products, and apparel manufacture. Petroleum and coal products accounted for about 41% of the total value of products exported to the group. Chemical manufactures represented approximately one third.
Our nation and state have continuously sought ways to improve trade, expand advantages, and enrich benefits to citizens. In 1993, I was privileged to be involved in the development of the North American Free Trade Agreement (NAFTA), which created the world’s largest free-trade area. It has been beneficial to our state, with more than half of our exports going to Mexico and Canada annually.
While CAFTA will never equal NAFTA in the value of goods imported from Texas, the agreement should benefit numerous industrial sectors across the state, thus proving to be a positive—even though small—contributor to our overall economy.