Texas Insider Report: AUSTIN, Texas– Governor Greg Abbott joined President Donald Trump for the United States-Mexico-Canada Agreement (USMCA) ceremonial bill signing in Washington D.C. This trade agreement between the United States, Mexico and Canada modernizes the 25-year-old North American Free Trade Agreement (NAFTA), and will support mutually beneficial trade leading to freer markets, fairer trade and robust economic growth in North America.
It is estimated that the USMCA will have a positive impact of $17.6 billion on Texas' annual gross product and create 164,700 new jobs in the state, according to December 2019 projections from Perryman Group. The USMCA also allows Texas increased access to trade with Mexico and Canada, the state's two largest export partners.
"Today's signing of the USMCA trade agreement is a win for the Lone Star State and all of America," said Governor Abbott. "As the number one exporter in the nation, a strong relationship with our trade partners is vital to Texas' booming economy and its unprecedented growth. Whether it be agriculture, technology, or energy industries, the USMCA will promote free enterprise and help create even more jobs in the Lone Star State. I thank the Trump administration and the Texas Congressional Delegation for their hard work and persistence to pass this monumental agreement."
USMCA benefits to Texas include:
- Strengthened trade relationships with top trading partners: Texas has been the number one exporter in the country for the past 17 years and relies heavily on its North American trade partners. USMCA will allow Texas increased access to trade with Mexico and Canada, the state’s first and second largest export partners, respectively. In 2018, total trade between Texas and Mexico surpassed $216 billion ($109.7 billion in exports and nearly $107 billion in imports) and trade with Canada surpassed $47 billion ($27.5 billion in exports and $20.2 billion in imports).
- Greater workforce opportunities and protections: Texas leads the nation in jobs dependent upon exports. With nearly 1 million people employed in trade with North American partners, USMCA will assist job growth in Texas. USMCA will also raise the bar for enforcement of labor laws, allowing Texas workers to benefit from higher wages and robust benefits. Innovative rules of origin will encourage more goods and materials to be manufactured in the U.S. and Texas and ensure that benefits of USMCA flow to North American workers.
- Cross-border investment opportunities: Mexican firms invest $3.4 billion into Texas and Canadian firms invest $7.2 billion into Texas annually. USMCA will allow for greater foreign direct investment from Mexican and Canadian firms through expanded collaboration and efficiencies between the international markets.
- Access for agricultural goods: According to a statement from the Texas Farm Bureau from December 20, 2019, current agricultural exports from Texas to North American partners amount to about $7.2 billion and stand to increase $2.2 billion under USMCA. In addition, USMCA is the first free trade agreement for the U.S. and Texas that addresses cooperation, information sharing and other trade rules related to biotechnology and gene editing.
- Energy industry growth: Texas is the top energy-producing state in the nation and is the leader in both natural gas and crude oil production. In 2018, Texas exported a combined $22.8 billion in petrol and coal products and $10.8 billion in oil and gas to Canada and Mexico. USMCA opens up opportunities for Texas to create new energy partnerships and increase exports in energy, particularly natural gas, which accounts for a majority of Mexico’s electricity production and overall energy use. USMCA streamlines the regulatory process for U.S. LNG exports to Mexico and Canada, and provides new flexibilities in rules of origin certification requirements for oil and gas moving between the U.S., Mexico, and Canada. It also fixes a longstanding issue in allowing hydrocarbons transported through pipelines to qualify as originating, provided that any diluent, regardless of origin, does not constitute more than 40% of the volume of the good.
- Small business benefits: small businesses account for nearly 93% of all Texas exporters. New customs and trade rules will make it easier for small businesses to tap into foreign markets and participate in cross-border trade. Moreover, the USMCA eliminates local presence requirements for cross-border service providers, benefiting small businesses by removing the unnecessary burden of opening a foreign office as a condition for doing business.