A&M International Professor Assesses Local NAFTA Impact

A Texas A&M International University faculty member has authored an article that offers a preliminary assessment of the impact of NAFTA on the Texas border economy that appears in a forthcoming issue of The Journal of Borderlands Studies.

Dr. Michael Patrick, professor of economics and chair of the department of economics and finance at A&M International, said his paper seeks to fill an information void that exists on localized impact after NAFTA's implementation.

"During the past few days and weeks, the President, Congress and special interest groups and others have debated the merits of the agreement three years after its implementation. While significant information details the national impact, little investigates local impact, particularly the impact on the Texas-Mexico border region," Dr. Patrick said.

Keypoints in Patrick's review note the affect on employment, impact of the 1994 devaluation, the variables provided by existing border ties, how NAFTA impacts growth in border economies and some cautions shared by those along the border.

Patrick's paper observes that in the first year, 1994, NAFTA spurred an increase in US-Mexico trade and commerce, international crossings, local bridge revenues, commercial truck and rail crossings and employment.

"For example, commercial truck and rail crossings were up 19 percent. Employment in border metropolitan areas (Brownsville, McAllen, Laredo and El Paso) increased by 4.5 percent and unemployment declined 2 percent. Retail sales and sales tax rebates increased by 4.8 and 6.8 percent respectively," Patrick explained.

Of the 1995 devaluation, Patrick said while a turnaround was seen the next year, border areas felt the impact most significantly.

"The December 1994 peso devaluation slowed the NAFTA-induced pace of growth in US-Mexico trade substantially in 1995. But by the close of 1996, international crossings and local bridge revenues exceeded 1994 levels by 13.1 percent and 4.8 percent, respectively. Retails sales and sales tax rebates in the border metro communities recovered 90 percent of their 1994 levels and unemployment was returning to pre-devaluation levels. Those communities in which economic activity was more diversified felt the impact of the devaluation least and recovered fastest," he said.

A continuing strength remains the border communities' long standing ties to its neighbor to the South, Patrick said.

"Texas border communities have long had strong cross-border trade and commerce ties, which account for roughly 50 percent of the region's labor force and 75 percent of local sales. These ties will likely strengthen as the Mexican economy recovers and trade and investment between Mexico and the US surpass pre-devaluation levels," he said.

Patrick believes Mexico will continue to solidify and expand on these ties with World Trade Organization (WTO) membership, adoption of open market, pro-trade and investment liberalization policies.

"The indicators are impressive: the region experienced rapid employment growth between 1985 and 1994, growing at an annual rate of 3.7 percent compared to 1.7 percent for the State of Texas. For the same period, trade is up 31 percent, transportation 43 percent and services 55 percent. US/Mexico trade as a whole is up 160 percent and cross-border trade is up 90 percent," Patrick noted.

Still, some share a cautionary concern, Patrick said.

"Many Texas border community officials and business community members see a rosy picture, but this view is not shared by all. The concern continues that many of the industries that have been traditional mainstays of border economies are in fact threatened while others say that the short-term immediate economic benefits serve to detract attention from greater concerns, such as the need to avert a disastrous collision between scarce natural resources, like water, and the push for economic growth, jobs and development," he said.

For additional information, contact Dr. Patrick at the College of Business Administration, 956.326.2490 or visit offices in Pellegrino Hall, room 304.

A&M International office hours are from 8 a.m. - 5 p.m. Monday Friday.

Journalists who need additional information or help with media requests and interviews should contact the Office of Public Affairs and Information Services at pais@tamiu.edu