AUSTIN – Disruption of trade with Mexico could have a major impact on the economy of Texas and the nation, according to speakers at The Bond Buyer's Texas Public Finance Conference.
"We're in the top five states in the nation with jobs tied to exports," Keith Phillips, senior vice president and senior economist for the Federal Reserve Bank of Dallas, said in a keynote Thursday. "Obviously if we get into trade war, Texas being one of the largest exporting states, is going to suffer more than most states."
Phillips said that trade with Mexico was a significant factor, along with oil and gas market resurgence, in Texas' robust recovery from the 2008 recession.
"Exports from the state, particularly in the first years of the recovery, were quite strong," Phillips said.
Another factor constraining the economies of Texas and the U.S., Phillips said, is a growing labor shortage.
"This is really not the greatest time to start restricting international labor mobility," he said.
President Donald Trump has accused Mexico of stealing American jobs by offering cheaper labor and has vowed to renegotiate the North American Free Trade Agreement while preparing to build a wall between the U.S. and Mexico.
But Phillips noted that the auto industry depends on cross-border traffic and that one reason Toyota chose San Antonio as the site for its truck plant was its proximity to Mexico where many parts are manufactured.
"If you look at the trains going through San Antonio, you'll see a lot of cars going into Mexico and a lot coming out of Mexico," said Phillips, who is based in San Antonio. "The U.S. has a comparative advantage in high-skilled jobs while Mexico has a comparative advantage in low-skilled jobs."
Exports from Texas to Mexico came to $95 billion in 2015, according to the International Trade Administration. Texas shipped $25.4 billion of products to Canada, the other member of NAFTA, and the state's second-largest export market.
Pete Saenz, mayor of Laredo, the largest border port in Texas, said that an average of 14,000 trucks pass over the city's four bond-financed toll bridges per day, producing $60 million per year in revenue.
"That's why we have such low property taxes," he said.
"Over 50% of all U.S.-Mexico trade comes through our port," Saenz said. "We're so heavily dependent – the state of Texas – has a surplus of $10 billion in trade with Mexico."
Saenz met with Trump when the Republican candidate came to Laredo during the campaign and said Trump listened to his presentation on the impact border trade has on the economy. Despite that meeting, Trump later reiterated his plans to build a wall and to demand Mexico pay for it.
While Trump has called NAFTA a "disaster," McAllen City Council member Richard Cortez said officials on the border don't understand that point of view.
"It's very hard to debate NAFTA when your opponent doesn't even tell you what is wrong with NAFTA," Cortez said.
Texas Comptroller Glenn Hegar, speaking Wednesday, said trade contributes $224 billion in gross state product annually. More than 70% of U.S. trade with Mexico comes through Texas, he said.
"Laredo is where 32% of all products from Mexico arrive in the U.S.," Hegar said. "Laredo is third in customs distribution for the entire nation behind Long Beach, Calif., and New York-New Jersey."
Asked about Trump's plan to build a wall along the 1,200-mile border between Texas and Mexico, Hegar pointed out the ruggedness of the terrain as a challenge to construction and the fact that the Rio Grande already serves as a barrier.
"Technology has changed the world," he said. "You have to have a technology factor."
Rep. Henry Cuellar, D-Laredo, told the Dallas Morning News that Trump's plan to force Mexico to pay for a border wall by cutting off payments from people in the U.S. to Mexico "would start a tariffs war, an economic war between the U.S. and Mexico."
Remittances from people in the U.S. to Mexico total more than $24 billion a year, according to Mexico's central bank. That comes close to the $25 billion estimate for the cost of the wall, according to some experts.
Trump has also called for canceling visas for Mexicans traveling to the U.S. and increasing fees for visas and border-crossing cards.
Texas Lt. Gov. Dan Patrick, who chaired Trump's Texas campaign, told the program Fox & Friends that he disagreed with Sen. John McCain's call for more technology to secure the border rather than relying on a physical barrier.
"He's wrong," Patrick said, adding that there have been 147,000 arrests for 447,000 crimes in the Texas border region over a four-year period. A wall would reduce those numbers, he said.
Patrick wants to continue spending $800 million per year on state back-up for federal border security. The Texas Legislature appropriated that amount to police the border with state Department of Public Safety troopers in 2015.
