Trade with Mexico enhances the Texas Economy: A Conversation with Glenn Hamer

Glenn Hamer, CEO of Texas Association of Business, spoke with us about the importance of trade between Texas & Mexico and opportunities for growth.

Mexico is our largest trading partner and a strong contributor to the Texas economy. Texas-Mexico trade accounts for 5.2% of our gross domestic product. That’s nearly $100.2 billion annually — making trade with Mexico a greater portion of Texas’s GDP than of any other state’s. In 2019 alone, trade through our shared border supported over 7 million jobs in the US and Mexico. That’s a serious and mutually beneficial gain for everyone, both in terms of job numbers and human capital. Additionally, the Texas-Mexico dynamic diversifies the local industry base. For example, manufacturing and food production has led Mexico-based companies to expand their footprint to Texas, as seen with companies like Envases Group and Bimbo Bakeries USA. With the implementation of the USMCA, we can expect Texas to become an even more attractive destination for Mexican companies and their investments, making the commercial and trade relationship between us even more relevant to our regional economy.

Hamer continued, revealing which industries he expects to grow between Texas and Mexico.

The top three cross-border supply chains for Texas and Mexico are High Technology, Motor Vehicles, and Machinery, valued in 2019 at $135B, $88.7B, and $56B respectively. Even with a brief decline in trade flow due to the pandemic in 2020, more than 80 percent of Texas auto parts exports went to Mexico. But these are not the only industries growing thanks to the Texas-Mexico partnership. Between 2019 and 2020, Food Manufacturing trade increased by $1.19B. Demand for vegetables like tomatoes also grew significantly; in 2020, $4.5B of fruits and vegetables were imported into Texas. Moreover, the energy industry is worth monitoring as Mexico works towards establishing energy independence. To prepare for self-sufficiency in petroleum production, the country has invested in Texas’s Deer Park refinery. Since Texas is the epicenter of technology that Mexico would need for oil and gas extraction, the countries will likely continue collaborating in the energy sector throughout the future.

The Texas Association of Business Foundation has recently engaged on a supply chain analysis and Texas competitiveness project, in partnership with the EDA. Our economic development consulting partner in this work, TIP Strategies, did some work to identify industry sectors that were ripe for reshoring or nearshoring, as well as mapping the assets we have in Texas to support growing those industry clusters. From their initial assessment, the following industry sectors were identified as the most viable and highest economic impact: Life Sciences/Biotech; Automotive/Mobility Technologies; Aerospace & National Security; Technology Hardware & Software; Energy; Transportation/Connectivity; Advanced Materials/Chemicals; and Entrepreneurship. A focus on these critical industry sectors will be especially important as we work to build more resilient supply chains and foster business and industry growth on both sides of the border.

Finally, Mr. Hamer discussed how Texas and Mexico can strengthen supply chains in the region.

Texas and Mexico need to balance efficiency with redundancy to establish resilient industries. The pandemic made it clear that when it comes to maintaining a strong economy, stable supply chains are critical, and complacency is a risk. Transporting goods over the border is highly susceptible to unpredictable risks and delays. In 2019, border delays reduced GDP in Mexico and Texas by $2.3B. We must invest in robust border trade and port infrastructure to support this important trade and commerce. We need to actively pursue avenues to fortify our supply chains, especially as demand for goods grows. Securing our supply chains will require coordinated collaboration between Texas and Mexico, as well as reliable funding to manage border operations. Implementing new technologies at border crossings and collecting data will also help us protect our trade partnership.