Through funding from our research grants, Dr. Jorge Eduardo Mendoza recently explored the relationship of trade and the effects of tariffs and transportation costs on goods exported between Texas and Mexico.
We spoke with him to learn more about why he chose to explore this topic and what knowledge he gained from his study.
Why did you want to focus on the importance of trade between Texas and Mexico?
Texas is the leading U.S. state exporter to Mexico, trading oil products, automobile components and electronics. Understanding the characteristics and determinants of the Texas trade with Mexico is critical for recognizing the potential benefits of the regional economic integration between Texas and Mexico.
What are your key takeaways from this research?
Texas is the U.S. state that trades more intensively with Mexico. The commercial relations are based on the state’s diverse economic activity and natural resources such as oil and gas. The commercial relationship in the oil and gas sector has been fundamental for the economic integration of the state with the Mexican economy.
In addition, intra-industry trade and global supply chains are important determinants of the trade between the two regions. The electronics and computer sector has seen an increase after the establishment of NAFTA, indicating the importance of this sector to the economic activity of Texas.
The establishment of the USMCA will bring potential incentives to integrate the regional supply chain and expand trade between Texas and Mexico, depending on whether or not the regional content requirement of the traded goods is met.
What did you conclude from this research?
The project results suggest that the reduction of tariffs has played an important role in the economic integration of the North American region.
The statistical analysis corroborates the positive impact of transportation costs and the level of economic activity for the intensification of trade between Texas and the Mexican states.
Polices to encourage trade between Texas and Mexico would require the development of additional communications and transportation infrastructure in order to take advantage of the relatively short distance between the border states of Mexico and Texas, and to be able to reduce transportation costs of the trade between Texas and the central Mexican regions that have greater economic activity.
What do you hope others learn from this research?
I would hope that policy makers and business leaders would consider, as a priority, the strengthening of the communication channels between the private sector and institutions in Texas and Mexico, with the goal of creating new opportunities for investment in strategic industries to compete in the international economy, and to take advantage of the new rules of trade established in the USMCA.
Go HERE to read about this research and other reports on trade and investment.
Dr. Mendoza is the Director of the Department of Economic Studies of El Colegio de la Frontera Norte, and holds a Doctorate in Economics with a specialty in labor economics from The University of Utah. Among his research topics is the phenomenon of migration and the impact of remittances on the economic growth of the northern border of Mexico. Learn more about him HERE.