The Nafta city that wasn't, Part I

This story was originally published at http://www.plazadearmastx.com/index.php/business/126-guest-column/497-the-nafta-city-that-wasnt-part-i


In last week's column we wrote about cross-border trucking and San Antonio's aspirations to position itself as a major Nafta trading hub. As the nation's seventh-largest city and, for cargo shipped through the most important merchandise port at Laredo/Nuevo Laredo 160 miles away, the first major stop on the U.S. interstate system, it just kind of makes sense. Not just for import activity, either. Alamo City should benefit both from throughput traffic and as a prosperous exporter of goods to its natural southern trading partner. Foreign-trade powerhouse Texas (earning $192 billion in 2008), after all, originates 15 percent of all U.S. exports and nearly 40 percent of those go to Mexico, making that country the overwhelming destination of choice for the Lone Star state, according to a study by the Federal Reserve Bank of Dallas. So it comes as an incredible shock to learn that San Antonio sells more to Canada than it does to Mexico.

We're not the only ones flummoxed by this fact. “When we first saw the numbers on exports to Canada versus Mexico, that was quite an eye-opener,” Mayor Julián Castro told PDA in an exclusive interview.

Here's the story. Two of them, actually. The first comes from official data from the U.S. Department of Commerce's International Trade Administration. In 2008, the latest year for which metro-level figures are available, San Antonio exported $998.6 million to Mexico and $980.2 to Canada – a scenario in which Mexico narrowly edges out the Canucks as our main market. Including exports to the rest of the world, San Antonio collected export receipts of $5 billion. But the ITA bases this data on merchandise shipping origins, not on production origin, creating flawed data. (For example, McAllen is reported exporting far more goods than it has capacity to manufacture.)

The Brookings Metropolitan Policy Program has devised a superior methodology, though it, too, has its flaws. It looks at industrial capacity and ascribes industrial exports to metro areas on a proportional basis. Thus, if San Antonio makes 10 percent of U.S. widgets, it is estimated to hold a 10-percent share of U.S. global exports of the same – even if no Alamo Widgets actually end up overseas. Not perfect, but more accurate than the fed's scheme. In addition, it includes services exports, such as foreign tourism spending, business consulting, and patent royalties. By Brookings' accounting, San Antonio only exported a measly $524 million to Mexico – half of the $1 billion shipped to Canada.

Brookings reports that San Antonio's metropolitan area exported $6.5 billion to all foreign nations in 2008, 7.8 percent of the metro's total economy – a ratio so scant it fetched a lowly ranking of 81 out of 100 U.S. metro areas. Only 5.4 percent of jobs derive from export activity, or 90th out of 100. These numbers reflect immediate opportunity loss for our residents. The average export job earned $52,087 that year, versus the average household income of $45,794 in 2008. That doesn't even factor in the billions in manufacturing investment or indirect employment that have been foregone. For example, as of 2009 Toyota had invested $1.2 billion and created 2,000 direct jobs.

Indeed, the main reason that Canada outbuys Mexico is because of our Toyota plant, its leading North American pickup facility. The good news is that San Antonio hosts a manufacturing operation so significant that it can reverse the polarity of our trade compass; the bad news is that only reflects the relative triviality of our manufacturing base. Nearly 50 metropolitan areas exported more to Mexico, including unlikely cities such as Virginia Beach, Providence, Hartford, and Buffalo.

Returning to ITA numbers, which exclude revenue from service exports, San Antonio only shared in 3.3 percent of $130.7 billion in Mexico-bound merchandise exports. You might want to re-read that last sentence. By comparison, the Houston metro area cashed in on 52.3 percent of Mexico-bound merchandise exports, while the Dallas metro area grabbed 14.7 percent. Austin, El Paso and Laredo all beat out San Antonio. And much of our receipts came from oil and gas extraction – not from manufactured goods. In fact, our city places among the leaders in oil and gas extraction, petroleum and coal products, mining, animal production, leather and related products, and printed matter and related products. Very 19th Century.

San Antonio has missed the Nafta money train.

There is a bright spot in this otherwise dismal scenario. San Antonio exports have been expanding at a slightly faster rate than the rest of the nation. In 2008, Brookings registered a 12-percent year-on-year rise, versus 9.2 percent for the nation as a whole. That hints at opportunity, and what better time than now as the city emerges from a recession-induced restructuring and under the current management?

Bear in mind that the painful assessment above is painted entirely with data gathered from 2008 – before Mayor Castro took office. Next week in the second installment of this two-part column, we'll share excerpts of our conversation with our city's relatively newbie leader and his ideas for coupling San Antonio to the locomotive of global commerce.