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For immediate release: April 24, 2006

Dallas Fed Focuses on NAFTA, Immigration, Texas Manufacturing and Growth in the Rio Grande Valley

DALLAS—The latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy examines NAFTA, immigration, Texas manufacturing and Rio Grande Valley growth.

In “Did NAFTA Spur Texas Exports?” economist Anil Kumar finds that NAFTA increased statewide exports not only to Mexico and Canada, but also to emerging markets in Europe, Latin America and Asia.

NAFTA is responsible for increasing Texas exports in 2000 by an estimated 23 percent beyond 1993 levels, according to Kumar. The state increased sales by 17 percent to Latin America, 15 percent to Europe and 13 percent to Asia.

“The international-trade expertise that firms gained by selling to Mexico may have helped them penetrate Europe, Asia and elsewhere,” Kumar writes.

Kumar also finds that knowledge- and capital-intensive industries in Texas—such as electronics, chemicals, transportation equipment and industrial machinery—have reaped the benefits of NAFTA. However, labor-intensive industries, such as lumber and furniture, were hurt by NAFTA.

In “The Economics of Immigration,” senior economist Pia Orrenius explains the importance of focusing on the skill level of immigrants rather than just their legal status when addressing their economic impact in the United States.

“About 40 percent of our Ph.D. scientists and engineers were born in another country,” Orrenius writes. “People tend to focus on illegal or low-skilled immigration when discussing immigrants and often do not recognize the tremendous contribution of high-skilled immigrants.”

She finds low-skilled workers also contribute to the economy but asserts the benefits must be weighed against the fiscal burdens, like health care and educational expenses, to state and local governments.

Legal status doesn’t dictate whether low-skilled workers will have more of a positive or negative economic effect, Orrenius explains.

“Being illegal doesn’t mean these immigrants have a worse fiscal impact,” she writes. “In fact, a low-skilled illegal immigrant can create less fiscal burden than a low-skilled legal immigrant because the undocumented don’t qualify for most benefits.”

In “Factories Still Matter in Much of State,” economist Fiona Sigalla and technical support and data analysis director Franklin D. Berger find that while much of the state’s job growth is in the service sector, manufacturing still remains vital to many communities. In 21 of Texas’ 254 counties, it accounts for 20 percent or more of the jobs.

Overall, however, manufacturing is a largely urban enterprise. Nearly 90 percent of the state’s 907,500 factory jobs are located in or near large cities, according to the authors.

Additionally, manufacturing has bounced back faster in Texas than in the nation as a whole. Last year, Texas added roughly 7,500 manufacturing jobs, a 0.8 percent increase, compared with a U.S. loss of 72,500 jobs, a 0.5 percent decline, they write.

Economic analyst José Joaquín López finds in “Dynamic Growth in the Rio Grande Valley” that the short-term economic outlook for the area is positive.

Employment gains in health care, increased agricultural exports due to DR-CAFTA and rising maquiladora employment should help drive the Valley’s economy in coming years, according to López.

Despite the positive short-term outlook, he writes that the region must improve the educational level of its workforce to increase per capita income.

Find the March/April issue of Southwest Economy online at


Media contact:
James Hoard
Phone: (214) 922-5307