Commentary: How NAFTA, immigration influence Texas’ economic future

Future challenges faced by the Texas economy with trade, immigration and border governance policies were the focus of a recent symposium convened by UT Austin’s LBJ School of Public Affairs and its Texas 2030 Project. Some eye-opening facts emerged.

Today’s Texas economy depends heavily on international trade and is built around technology, energy-related goods and professional services. Texas exports more goods than any other state by a large margin — 40 percent more than the next largest exporter, California. Yet the California economy is 50 percent larger than that of Texas.

The flashpoint reshaping U.S. trade policy is NAFTA. Economic studies show the trade agreement having a small, positive impact on the economy overall. In practical terms, the winners from this agreement gained enough to more than offset the economic pain of the losers. But there has been little effort to cushion these losses.

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The result is today’s highly charged NAFTA debate, with winner and loser industries and regions. Since NAFTA trade is nearly half of Texas exports, Texas is one of the largest net winner states. But even within Texas, winners and losers co-exist: An expert identified major urban centers where most Texans live as doing well; along the border and in patches of West Texas, less so.

Immigration will also affect our economic future. As with trade, there are winners and losers. Studies show the biggest winners are those with the most education; the big losers were those with the least education. Texas is well above average in the share of immigrants in its work force — more than 21 percent — compared with a U.S. average of 17 percent. The jobs that immigrants hold are vital to some of Texas’ fastest-growing industries.

The most difficult and divisive problem faced by the Texas economy involves an unpleasant reality: drug and human trafficking. Along our border, these activities form a single, integrated underground industry. It makes above-ground activities more difficult and expensive — and it reduces the quality of life. The de facto security zone that now exists along the Texas border slows trade and commerce, as well as wildlife, conservation and tourism activities.

Human trafficking has one direct link to trade policy: If diminished access to U.S. markets were to significantly reduce employment opportunities in export industries to our south, increased flows of migrants should be expected. Flows of unauthorized immigrants surged after the Mexican economic crisis of the mid-1990s.

At the end of the day, several points were clear.

Texas’ recent economic growth and economic future are closely tied to U.S. success competing in a world economy.

The global industrial supply chains that were created because of NAFTA and other trade agreements clearly have provided a net economic benefit to Texas. Texans should resist changes to trade policy that do not take their interests into account. The large automotive assembly plants run by Toyota in San Antonio and General Motors in Arlington — both highly dependent on component and subassembly manufacturing supply networks reaching deep into Mexico — exemplify how Texas gained from creation of global supply chains linked to our NAFTA neighbors.

Similarly, we are more dependent than average on immigrants in our industries. Texans should pay close attention to details of more restrictive immigration policies that are being proposed — because they may have outsized impacts on the Texas economy.

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On the front line of an underground drug and human trafficking industry, our border with Mexico is destined to be a laboratory for immigration policy. Texans should work on developing new and innovative ideas, not sit back passively as others unfamiliar with our state contemplate costly and disruptive experiments in our backyard.

Texas’ future economic success lies in making our state the best possible location for industries shaping up as the future of Texas — high technology, energy-related products and technology, and professional services. Texas should be a leader in showing how investments in education at all levels make Texans winners from globalization, delivering economic benefits from both trade and immigration. With greater investment in its human and physical infrastructure, the entire Texas economy will flourish.

Flamm holds the Dean Rusk Chair in the LBJ School of Public Affairs at the University of Texas.

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