Did NAFTA Spur Texas Exports

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Did NAFTA Spur Texas Exports?

• Anil Kumar
• Federal Reserve Bank of Dallas

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North American Free Trade Agreement

• Came into effect on Jan. 1, 1994
• One of the most significant trade events of the
  90s
• A trade agreement between three nations
• United States, Canada and Mexico
• Population 426 million
• Total GDP 13 Trillion
• Total Trade 700 Billion

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Potential Effects of NAFTA

• Prices and wages
• Labor markets and jobs
• Imports and exports
• Trade creation or trade diversion
• State and the local economy

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What are Free Trade Agreements (FTAs)?

• FTAs are preferential trading agreements
• FTAs and Customs Union
• FTAs and World Trade Organization
• Economic impact of FTAs depends on net trade
  creation

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NAFTA and Texas

• Texas shares a long border with Mexico
• Texas and Mexicos economies closely integrated
• Americas top exporting state

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Non-NAFTA Factors Affecting Texas Exports

• Texas economic growth
• Economic growth in importing countries
• Tariff structure of importing countries
• Maquiladoras
• Peso Crisis and purchasing power of Peso
• Trade agreements other than NAFTA

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Impact of NAFTA on Texass Exports

• Led to a 28 percent in increase in Texas exports
  to Mexico
• Accounted for a quarter of Texas increase in
  exports to Mexico
• Had a significant impact on Texas exports to
  Canada of 47 percent
• Responsible for one third of Texas increase in
  exports to Canada

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Did NAFTA Merely Divert Exports?

• NAFTA contributed to moderate gains in Texas
  exports to rest of the world
• Latin America 17 percent
• Europe 15 percent
• Asia 13 percent

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Conclusion

• NAFTA had a positive impact on Texas exports
• Heterogeneous impact across industries
• Estimated effect on industries consistent with
  the theory of comparative advantage
• NAFTA induced effect on Texas exports to Mexico
  and Canada not at the expense of exports to other
  regions
• One important caveat- the overall economic impact
  of NAFTA depends on total trade, not just exports