Texas is a massive destination for foreign investment, and Houston in particular tops the list of American cities that export the most abroad, as the Greater Houston Partnership emphasized in a report released on Monday.
But in recent years, that boom in trade has faded — both in the value of goods exchanged, which largely reflects the price of oil, and in the total volume, which tells us more about the economic activity generated by trade.
Note that Texas now exports about as much as it imports, making it one of the few states that have balanced trade with the rest of the world. The U.S., in contrast, runs a substantial trade deficit with the rest of the world.
Exports account for about 18 percent of economic activity in Houston, according to the Brookings Institution, a Washington think tank.
Imports, however, aren’t necessarily a bad thing: Many are used as components in American manufacturing. The fall off in imports is in part due to U.S. manufacturers purchasing less steel for use in heavy equipment, as purchases from the oil field slowed to a trickle.
The trade bust is less severe when you look at it in terms of tonnage of goods going through the Port of Houston, but it’s still visible. Here are a couple charts from the Partnership’s report that illustrate the relationship between volume and value:
That slump isn’t just a Houston or a Texas thing. Most of America’s biggest port cities have also seen declines in trade activity in recent years, as part of a global slowdown that reflects the end of a long boom in extended supply chains that brought goods from all over the world to your neighborhood Wal-Mart. As labor costs have leveled out and marketing timetables have gotten tighter, it’s become more common to manufacture closer to the consumer, which means fewer products need to cross borders.
Another big driver of the trade slowdown is weak global demand. The state’s most important customers are Mexico, Canada, China, Brazil and South Korea, and all of those have contended with economic slowdowns in the past two years. Brazil, especially, has struggled as political instability takes a toll on its economy.
This is important context for the renegotiation of the North American Free Trade Agreement, which the Trump administration kicked off last week with a notice to Congress that sets a three-month timetable before talks can begin with Mexico and Canada.
Although Trump’s deputies have softened his campaign rhetoric about a trade agreement that has brought considerable benefits to Texas, trade wonks are still very nervous that any attempt to revise the deal in a way that’s more favorable to the United States could backfire by drawing retaliation from Mexico and Canada.
At a conference on the Texas-Mexico relationship earlier this month at the Federal Reserve Bank of Dallas, economists discussed how the state had gained from economic integration with its southern neighbor, and how a NAFTA overhaul might be focused in order to do no harm.
“Despite a lot of rhetoric from places that can afford to do rhetoric, here we have to be a little bit more practical,” said Dallas Fed economist Pia Orrenius. She acknowledged that while the trade deal had caused some job losses in manufacturing states, the correct approach would compensate the losers rather than try to stop the changes altogether.
“If you take a practical approach,” she said, “you look to see how you can mitigate those losses and take advantage of the gains.”
This article was originally published at: http://www.houstonchronicle.com/business/texanomics/article/As-NAFTA-reset-looms-Texas-exports-already-on-11165934.php