Monthly Article

February 2015 Monthly Article – Record Breaking Exports

By Jerry Pacheco

On February 5, the U.S. Department of Commerce (USDOC) issued a press release stating that U.S. businesses exported $2.35 trillion in goods and services in 2014, breaking a record for the fifth year in a row. According to the release, new records were achieved in exports of capital goods, consumer goods, petroleum products, foods, feeds, beverages and automotive vehicles/parts. Exported goods accounted for $1.64 million, an increase of 2.7 percent. Service exports hit an all-time high of $710.3 billion. Leading categories in this sector included travel, transport, charges for the use of intellectual property, and financial services.

USDOC estimates that the current level of exports is supporting 11.3 million American jobs and has been an instrumental factor in helping the U.S. climb out of the Great Recession. The top five exporting states to the world include Texas ($289 billion), Washington ($174.1 billion), New York ($86 billion), Illinois ($68 billion), and Louisiana ($65 billion). From this list, it becomes obvious that top exporting states have major port infrastructure for shipping products to foreign destinations. This not only includes products that originate in these states, but products made in other states that are shipped from their ports. Oftentimes, a product made in a state such as Colorado, shipped to Mexico though a Texas sea or land port of entry, shows up as being “Texas origin” – due to customs brokerage firms in Texas that cross the merchandise for their clients and generate the appropriate paperwork. Some firms simply note the export as having a Texas origin.

On the U.S.-Mexico border, cross-border trade supports millions of direct and support jobs, and has created economic development opportunities where none previously existed.

Texas is the giant of all states in terms of exports to Mexico. In 2014, this state exported $102.6 billion to our southern neighbor, a 6.3 percent increase compared to 2013. Rounding out the top five exporters to Mexico were California ($25 billion), Michigan ($10.8 billion), Arizona ($8.6 billion) and Illinois ($7.9 billion).

The only state on the Mexican border not appearing in the top five list is New Mexico, which has a small state economy and is relatively new to the trade game with Mexico. However, in 2014, New Mexico’s exports to Mexico increased from $800 million to $1.55 billion, a 93 percent increase. With this increase, New Mexico led all U.S. states in export percentage growth to Mexico.

Examining New Mexico’s top three export categories to Mexico (computer and electronic products; electrical equipment, appliances and components; and fabricated metal products) gives us a clear indication that the state is becoming a supply base for Mexico’s booming maquiladora (twin plant) industry. These industrial exports are production inputs for what is being produced, mostly in northern Mexico. Almost all of the 93 percent increase in trade with Mexico can be attributed to the rapidly expanding industrial base in the Santa Teresa region.

Computer electronic components are being shipped from Santa Teresa across the border to Foxconn, which lies a stone’s throw away from the Santa Teresa Port of Entry. This Taiwanese company is assembling up to 50,000 computers per day for Dell Computers. The 1.6 million-square-foot plant, with 8,000 employees, builds Dell computers for anybody who orders in North America. The electrical equipment and metal fabricated products are being shipped from Santa Teresa to Mexican plants producing everything ranging from refrigerators, automobiles, HVAC systems, and telecommunication equipment.

Comparing New Mexico’s Mexican exports to those of Texas is like comparing an ant to an elephant. However, New Mexico’s dramatic increase in trade is not bad when you consider the growing role that exports are playing in the state’s economy. One USDOC statistic that I have seen says that every $1 billion dollars in exports the U.S. supports approximately 5,600 jobs. Typically, these jobs are higher-paying jobs and create a valuable multiplier effect for a state, along with increased state revenues. Exports create economic base jobs that result in a net revenue flow into the state from which the exports originate.

In U.S. border states, which have the distinct advantage of having close geographic proximity to the growing Mexican economy, growth in exports can neutralize other volatile industries such as petroleum production, which can see decreases in a very short period of time. A lot of what is exported – intermediate metal, plastics, and paper products – probably are not the sexiest of things. However, I always call these the “meat and potato” categories which are steady and grow with the Mexican economy and its consumption. In this manner, these types of exports are some of the best sustainable economic development that states can create.