We partnered with the SMU William J. O’Neil Center for Global Markets and Freedom to produce their Center’s annual report “Texico: The Texas-Mexico Economy and its Uncertain Future” written by Richard Alm and W. Michael Cox. Alm and Cox presented the report’s findings at SMU Oct. 2, followed by a discussion with NASCO President Tiffany Melvin.
“The Texas-Mexico partnership is off to a great start,” Cox said in his presentation. Integration between the two economies took off in the last two decades as economic barriers to trade began to recede. Texico’s annual GDP is more than $4 trillion, making it the world’s sixth largest economy, just behind that of Germany. Trade between Texas and Mexico totaled $188 billion in 2017, more than double than the total trade between California and Mexico. Mexico trades more with Texas than with any country, including China.
As trade barriers along the Rio Grande continue to recede, immigration remains the least-free market for Texico. Even so, Mexican natives hold 12% of the jobs in Texas. With Texas at record-low unemployment, 4%, the state’s economy will depend on laborers migrating north. This could be problematic, Cox noted, as migration from Mexico is declining. Alm and Cox argued that Texico would benefit from increased legal migration.
Though both economies have grown dramatically since NAFTA was enacted in 1994, Mexico’s economy has grown slower than Texas’ with an average annual increase in GDP of .9%. It’s growth is also lower than other economies developing during the same time period such as China, South Korea and Chile. Alm and Cox argue this is because Mexico has obstacles to economic freedom, especially in local governments, that are not present in China, South Korea and Chile. Corruption and increasing violence are the root of this stall.
While economics and current policy point to a bright Texico future, Cox pointed out that the political rhetoric from President Donald Trump and President-elect Andres Manuel Lopez Obrador throws the future of the partnership into uncertainty.
Tiffany Melvin gave a more optimistic outlook, saying the new NAFTA, the United States Mexico Canada Agreement (USMCA) is reason for celebration. Melvin argued that there’s no reason that North America shouldn’t be the most competitive region in the world. Canada, Mexico and the United States can all maintain their individuality and sovereignty while still supporting policies of integration to advance the entire region. Fourteen million jobs depend on trade in North America. She acknowledged that there is some fear for loss of jobs with heightened trade, but she said that NAFTA has been a pinata for all bad things while the vast majority of job loss was due to technology disruption.
Although Melvin was optimistic about the signed USMCA, she also warned a lot of damage had been done on the relationship side that will take a lot of work to gain back. “We became a North America family,” she said. A lot of the successful collaboration on issues between the countries, like security, was because of a sense of friendship, not a written and signed treaty.