News Column

US-EU Trade Pact Could Add Billions to Texas Economy

Feb. 21, 2013

Dan Zehr, Austin American-Statesman

Texas exported more than $29 billion of goods and services to the European Union last year, but an economic projection released Wednesday suggests that figure could shoot significantly higher if U.S. and E.U. officials can hammer out a long-sought free-trade agreement.

If negotiators reach a pact to eliminate tariffs between the United States and the 27 E.U. member countries, Texas would stand to gain at least $9.1 billion in annual business activity by 2020, according to the report by the Perryman Group, a Waco-based economic consulting firm.

That number could rise as high as $17 billion if other trade obstacles are eliminated and if companies capitalize on the productivity gains that would likely arise from freer business interactions, according to the report, which was commissioned by the British Embassy.

Collectively, that activity could help generate anywhere from 89,000 to 166,000 Texas jobs, according to the report, which considered a range of factors such as trade flows, price responses and projected patterns of the state's competitiveness in attracting European trade.

The study was distributed Wednesday by a group of government and business leaders from Texas and the United Kingdom, who held a news conference at the state Capitol to extol the virtues of a potential free-trade pact. Officials said an agreement would stimulate growth in Texas and throughout the United States and the E.U., which together account for about half the global economy despite the recent downturn.

"This is the best stimulus package you'll get for free," said Ian Reason, U.S. general manager for BAE Systems, a British aerospace company with about 37,000 employees in the states.

Growing optimism on both sides of the Atlantic has helped recharge the trade talks in recent weeks. While representatives have yet to resolve some of the thorniest obstacles, including agricultural trade issues, both sides said they have made progress on several key issues that had stalled talks for years.

Last week, a U.S. trade representative told The New York Times that a new agreement is possible before the end of 2014.

The negotiations grabbed the spotlight last week when President Barack Obama included the so-called Transatlantic Trade and Investment Partnership in his State of the Union address. The idea of a trade pact with the E.U. -- similar to the North American Free Trade Agreement, or NAFTA, that opened business between the United States, Canada and Mexico in 1994 -- appears to have widespread bipartisan support in Congress.

"We know when we've entered into these agreements before, like with Mexico, that it opened up commerce and trade with Texas," said U.S. Rep. Michael McCaul, R-Austin. "Texas was a real winner in that free-trade agreement, and it brings us closer to Mexico."

Calling it one of the few issues in Washington "where we can all come together," McCaul said groups as disparate as the U.S. Chamber of Commerce and the AFL-CIO have expressed tentative support for a deal. Such an agreement "could be beneficial" for workers on both sides, the AFL-CIO said on its website, "but as with all trade agreements, the rules matter."

For the most part, the United States and the E.U. haven't erected the types of high tariffs that tend to stifle trade. U.S. exports to the European Union totaled $265.4 billion last year, while imports hit a record high of $380.8 billion, the Perryman report said. While Texas trade to the Europe falls far short of the $95 billion the state exported to Mexico in 2012, exports to the E.U. have topped $29 billion in each of the past two years, according to U.S. Commerce Department data.

Austin Mayor Lee Leffingwell, who led a local trade mission to the U.K. in January 2012, said Central Texas exports to that country now exceed $622 million a year. Several local companies, including Whole Foods and Bazaarvoice, have expanded their operations there, he said. Larger Central Texas companies, such as Dell Inc. and National Instruments, which operates a factory in Debrecen, Hungary, have established a sizable presence in the E.U.

"Obviously, Austin's high-technology economy depends on global trade," Leffingwell said. "Europe is one of our most important trading partners."

Given the already huge volumes of trade between the United States and the E.U., the elimination of the small tariffs that do exist -- along with any reduction of nontariff barriers to trade, such as government procurement rules and differing regulatory standards -- could result in significant economic growth for both sides, said Philip Barton, deputy head of mission of the British Embassy.

Ideally, Barton said, trade barriers would shrink or disappear around the world. But given the tariffs that exist, the expanding global economy and the rising influence of China, a new trade agreement would give the United States and E.U. a chance to exert greater influence on worldwide trade, he said.

"Either we can stand together and agree on some shared standards," Barton said, "or we can stand apart and watch others set the standards. I think there's a real moment of opportunity to come together."

Source: (c)2013 Austin American-Statesman, Texas Distributed by MCT Information Services

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