From D CEO July 2018Subscribe
Texas boosters like to brag about the state’s prowess as an exporter. They’ve got a great story to tell: Texas more than doubled its exports in the past 15 years and ranks No. 1 by far among states in selling to the rest of the world. More than 1 million Texas workers owe their paychecks, at least in part, to what our state ships overseas.
Texas’ success as an exporter—and the threat it faces from today’s protectionist mood—was the topic of our column in D CEO’s July/August 2016 issue. This month, we focus on the rest of the trade story by looking at Texas’ imports—what we buy from others rather than what we sell to them.
While exports are lauded as a job-creating blessing, imports are widely cursed as a job-destroying scourge. We’ve been told time and again that what Americans buy from other countries amounts to a drain on our economy, taking sales from U.S. firms and costing U.S. workers their jobs.
We’d be better off—so the America-First protectionist logic goes—if we slapped high tariffs on imports, bought domestically made products, and saved the jobs of our fellow Americans. Consumers, of course, end up footing the bill through higher prices and reduced spending.
Our public discourse on trade often comes down to this: Exporting’s good. Importing’s bad.
What folly! The protectionist stance on trade is completely and tragically backward. Exports aren’t the gain from trade; they’re the cost. Imports aren’t the burden from trade; they’re the benefit. To see it, keep an eye on what really matters—who does the work and who gets to consume.
Start with exports. We work and use our resources to produce something useful, then the fruits of our labor get packed into the hold of a ship and sent to some other country for its consumers to enjoy. We’d be foolish to give away our goods for nothing—so foreigners send us some of their money.
Now turn to imports. Foreigners do the work, and we get all sorts of things that make us happy—German cars, Chinese electronics, Italian shoes, and Chilean wines to name just a few. Like Americans, foreigners aren’t foolish, so we won’t get their products unless we send them some of our money.
Exports reduce our living standards; imports help us live better. In fact, the only sensible reason to export is to earn money to buy the imports that make people better off. Otherwise, trade’s all work and no play.
Top Five Texas Imports
This table presents the broad categories for the top five Texas imports in 2012, plus the value of those imports from the state’s three largest trading partners.
|Electric machinery, etc.; Sound Equipment; TV Equipment; Parts||$64,192,662,359||$22,654,788,907||$20,333,986,152||$571,798,473|
|Nuclear reactors, boilers, machinery, etc.; Parts||$44,001,167,686||$21,649,482,144||$7,599,281,900||$1,881,201,935/td>|
|Mineral fuel, oil, etc.; Bituminous substances; Mineral wax||$43,484,776,721||$8,391,179,719||$20,988,702||$6,588,800,126|
|Crude oil from petroleum & bituminous minerals||$34,558,579,043||$7,370,000,431||N/A||$5,781,043,758|
|Electric apparatus for line telephony, etc.; Parts||$31,400,090,073||$7,160,037,791||$13,561,566,160||$59,573,311|
Second to California
The Census Bureau collects data on the movement of goods around the country by road, rail, air, or any other transport mode. For each state, it records the dollar value of these shipments and sorts them into three buckets—those moving within a state, those going from one state to another, and those arriving from foreign countries.
The data show Texas imports were more than $263 billion in 2017, ranking a distant second to California, which imported $441 billion. After Texas came Michigan at $140 billion, Illinois at $136 billion, and New York at $127 billion. The small, rural economies of Wyoming and South Dakota imported the least.
In sheer dollars, states with big economies will buy more than those with small ones—so we adjust for size by looking at imports as a share of each state’s total shipments. Texas dropped down to 18th place at 11.6 percent, virtually tying Pennsylvania. The runaway leader in import penetration was Connecticut at 39.8 percent, followed by New Jersey at 23.1 percent, and California at 22.7 percent. Eleven states had imports below 5 percent of shipments.
Texas accounted for about 11 percent of the nation’s total imports in 2017. A third of the state’s imports came from Mexico, with 16 percent from China, and nearly 7 percent from Canada. The data identify 22 other countries—but none contributed more than 3.4 percent.
Texans buy an astonishing array of products from overseas—more than $18 billion in vehicles and parts, almost $5 billion in organic chemicals, and $2.7 billion in iron and steel. And there’s so much more: $1.6 billion in clothing, $1.5 billion in shoes, $932 million in clocks and watches, $780 million in glass products, $398 million in seafood, $29 million in umbrellas, and $19 million in live plants and cut flowers. The list could go on for pages and still not be complete.
Big-dollar foreign shipments included chemicals, metals, machinery, explosives, paper, and other industrial products—in effect, inputs state companies need to keep their businesses operating and their workers busy. Texas, the nation’s leading oil and gas producing state, imported $35 billion in petroleum products in 2017, most of it no doubt bound for the refineries and petrochemical plants on the Gulf Coast.
Texas exported $264 billion in 2017, so the state ran a small trade surplus. But recognizing imports as the benefit of trade and exports as the cost, maybe that’s not something we should get too excited about.
Foreign goods make a significant contribution to Texas’ well-being, but domestic suppliers, Census Bureau data indicate, account for almost 90 percent of Texas’ shipments. In-state companies supplied almost 64.5 percent of these goods—not surprising, given Texas’ size and its diverse economy.
Almost 24 percent of Texas’ shipments arrive from other states, third lowest after California and Alaska. Not surprisingly, small states tend to get the highest share of shipments from domestic suppliers beyond their borders.
In 2015, the state that sold the most to Texas was California, with the top product being electronics. Next came our neighbors—Oklahoma (coal) and Louisiana (coal). After that, it’s the Midwestern states of Illinois (electronics), Kansas (grains), Indiana (motor vehicles), and Ohio (metals).
What Texans buy from other states aren’t “imports” in the usual parlance, but these shipment are imports from a purely parochial, Texas-First point of view. After all, goods from other states impact the Texas economy just like goods from other countries. We pay for them with money that could have been spent in-state, so both could be said to cost Texans their jobs. If imports kill jobs, Californians a thousand miles away should be just as culpable as the Mexicans right across the Rio Grande.
Applied to nation or state, this protectionist thinking reveals a muddled and backward mindset that threatens to make us poorer. Texas households and companies benefit by consuming imports from California—just as they do with imports from Mexico. The sales help Californians and Mexicans buy what they want from other countries and states—we export to import.
We should clear our heads and revise our rhetoric on trade—from exporting’s good and importing’s bad to exporting’s good and importing’s good. If we recognize the value of both sides, we’ll be better off for it.
W. Michael Cox is founding director of the William J. O’Neil Center for Global Markets and Freedom at Southern Methodist University. Richard Alm is writer-in-residence at the center.