Yesterday we saw that the underlining factor driving manufacturers from all over the world to set up manufacturing lines in México is not driven by cheap labor and lax regulatory oversight, but rather by giving producers access to 60% of the global marketplace. NAFTA gives those building in México competitive access to the largest pool of worldwide consumers. However, none of that matters to the displaced workers in border cities like El Paso.
Since NAFTA was started, the unemployment rate in El Paso dropped from double digits to about 5%. Today it is under 5%. However, the narrative remains that NAFTA is detrimental to El Paso. The reason for this is the mistaken narrative that has remained unchallenged by the facts. For example, the Texas economy has tremendously benefited from NAFTA, and yet the Texas government embraces the Donald Trump narrative of isolating and demonizing México.
The Texas export economy outpaced California in 2015. Texas exported $347 billion in goods while California managed only $163 billion. [Federal Reserve Bank, Fourth Quarter 2016] Yet, the California government openly opposes Trump’s attacks on immigrants and México, while Texas embraces them.
There is no doubt that the El Paso economy was fundamentally changed because of NAFTA. But so was the Cd. Juárez economy. The difference is that Juárez embraced NAFTA, while the El Paso leadership blamed it for El Paso’s poor economy.
But even then, the El Paso poor economy is a fictitious narrative. Who and why this narrative was created is up for debate, but nonetheless the false narrative persists that NAFTA is hurtful to the El Paso economy.
The Federal Reserve Bank of Dallas routinely posts reports showing how the unemployment rates in the border communities have consistently dropped since NAFTA was launched. The average unemployment rate for El Paso, between 1980 and 1993 was 10.8%. From 1994 through 2002, the unemployment rate for El Paso averaged 9.5%. Today, it is below 5%.
El Paso fared better than Brownsville, Laredo and McAllen in terms of unemployment rates during the same period.
Even more significant is per capita income. The gap in per capita income between the border cities and the rest of the nation has narrowed as NAFTA was implemented. El Paso (67.8), again did significantly better than Brownsville (56.8), McAllen (51.1) and Laredo (61.9). [Federal Reserve Bank of Dallas, Fourth Quarter 2016]
The Federal Reserve Bank of Dallas estimates that for every 10 percent increase in manufacturing in México, it results in jobs increases by 2.2% in Brownsville, 4.6% in Laredo, 6.6% in McAllen and 2.8% in El Paso.
As you can see, El Paso’s per capita income against the nation has stagnated in recent years, however it remains much stronger than pre-NAFTA. The narrative blames the income disparity and job losses on NAFTA, however look at the ongoing public corruption scandals during the last decade and compare them to the other border cities. Now look back at the job increases because of NAFTA on the border cities and the correlation between public corruption and job growth stagnation readily become apparent.
You would think that when people around the nation talk about manufacturing centers, they would be talking about cities like El Paso. Yet, Cd. Juárez almost always comes up as the definition of a manufacturing city. Yet, without El Paso, Juárez would not have access to the U.S. market and as a result it would have remained the tourist curios peddler of México that it was in the late ‘70’s.
What is wrong with that picture when it comes to El Paso?
I submit to you that the job situation and the high taxes in El Paso are not the result of NAFTA, but rather the city’s politics that has embraced public corruption as its mandate.