Successful Trade Negotiations Between United States and European Union Could Yield Substantial Economic Benefits for the State of Texas

Released on August 07, 2018

President Trump's recent announcement that the United States and the European Union (EU) would begin trade negotiations and work toward reducing constraints that could yield short-term success and help set the stage for other progress in the near future. EU members are major US trading partners, and, not only would a strong trade deal with zero tariffs have the potential to further enhance economies on both sides of the Atlantic, but also provide substantial benefits for the state of Texas.

The Lone Star State has significant trading relationships with many EU countries. Five of Texas' top 25, excluding the soon-to-be Brexited Great Britain, exporting countries are EU members (the Netherlands, Belgium, Germany, France, and Italy). In 2017, Texas exports to these countries totaled nearly $20.0 billion (the number rises to about $25.6 billion if you include Great Britain). Seven of the top 25 countries (again excluding Great Britain) from which Texas imports are EU countries including Germany, Italy, France, Ireland, Spain, the Netherlands, and Belgium.

"As the leading US exporting state, Texas would clearly benefit from the US-EU pact," said Dr. Ray Perryman, founder of The Perryman Group. "The state would likely see significant economic benefits, with additional potential gains stemming from productivity enhancements and efforts to eliminate non-tariff barriers to trade."

The Perryman Group has analyzed the potential impact of a free trade agreement between the United States and the European Union on business activity in Texas. According to this analysis, if all tariffs are removed on goods traded between the United States and the European Union, potential gains in business activity in the state include almost $10 billion in output (gross product) each year and 89,600 permanent jobs (once markets have time to adjust).

"Cooperation can also yield big benefits even beyond those associated with free trade," said Dr. Perryman. "Impediments such as excessive or inconsistent regulation or complex customs processing can introduce inefficiencies and other issues, and working toward reducing such constraints could have a positive economic impact for both sides. If we can get this deal done and follow it with a positive outcome for NAFTA (and elsewhere), the US and Texas economies will realize sizable gains."