Dallas Fed: NAFTA Increased Texas Exports

Overall, NAFTA had an export-weighted average effect of 28 percent on Texas exports to Mexico. Adjusted for inflation, the trade deal accounted for roughly a quarter of Texas’ 111 percent increase in exports to Mexico between 1993 and 2000.

During the same period, Texas’ NAFTA-related exports to Canada rose 47 percent, or about a third of the state’s 131 percent gain in that market. Texas sells quite a bit more to Mexico than to Canada. Even if the percentage effect is smaller, the NAFTA-led increases in exports to Mexico are larger in dollar terms. Industries with statistically significant gains in exports to Mexico as a result of NAFTA were rubber and miscellaneous plastic products (79 percent), printing and publishing (78 percent), textile mill products (75 percent), petroleum and coal products (69 percent), leather and leather products (71 percent) and electronic equipment (49 percent). Significant declines were found in lumber and wood products (89 percent) and furniture and fixtures (75 percent).

The statistically significant NAFTA winners in terms of exports to Canada were oil and gas exploration equipment (286 percent), furniture and fixtures (75 percent), industrial machinery including computers (70 percent), apparel (66 percent), instruments and related products (58 percent) and rubber and miscellaneous plastic products (54 percent). The only significant decline was in metal mining (88 percent).

The diversity in gains and losses of exports among industries suggests trade deals affect economic sectors differently. Lower tariffs no doubt gave some Texas industries an advantage over Mexican and Canadian companies. Export declines might signal an inability to compete, although they could simply reflect some firms’ decisions to shift economic activity to other states. Because Texas had more winners than losers, though, we can conclude that NAFTA in general made Texas industries more competitive.

Southwest Economy

Issue 2, March/April 2006
Federal Reserve Bank of Dallas

Did NAFTA Spur Texas Exports?
By Anil Kumar

http://www.dallasfed.org/research/swe/2006/swe0602b.html

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