Global Trends & Market Shifts: Texas, China, and Mexico

In 2005, the United States' North American Free Trade Agreement (NAFTA) partners, Canada and Mexico, contributed about 30 percent of the overall value of U.S. international merchandise trade - a vast majority of hemispheric, north-south trade. Meanwhile, the threelargest economies in East Asia (China, Japan and Korea) contributed 21.9 percent, while, by comparison, the share of the three-largest European Union trading partners (France, ' Germany, and the United Kingdom) was only 9.17 percent.

At the state level, the majority of Texas' trade historically has been, and continues to be, with Mexico. Texas and Mexico have leveraged their common, 1,254-mile border, to establish a relationship that shapes local economies and policies on both sides. But what will happen to both economies as China continues its ascendance as a global economic power?

The Texas-Mexico Connection

Mexico continues to use its low-cost labor advantage to entice companies to establish manufacturing facilities south of the border. This migration of production has led to the creation of the maquiladora industry, perhaps the largest and most recognized residual of Mexico-Texas trade. The emergence of the maquiladora industry also makes up the largest component of U.S.-Mexico trade. Maquiladoras receive an estimated 78 percent of all goods (components and services) exported to Mexico from the United States. Furthermore, 79 percent of the maquiladora industry is owned by U.S. companies.