Houston is one of the nation’s most international cities, but that achievement and economic success is predicated on one thing: global trade.
More than 5,000 Houston businesses engage in international commerce, exporting $109.2 billion worth of goods in 2017 and importing $83 billion in products. The Houston region has a $26 billion trade surplus with the rest of the world, which brings wealth to our community.
Whether you support globalization or not, 17.3 percent of Houston’s gross domestic product comes from exports, supporting 330,343 jobs, according to the Greater Houston Partnership. That’s why most Houston businesses desperately want to see President Donald Trump expand trade, not restrict it.
"When you look at the portion of GDP tied to exports, Houston is No. 1,” Patrick Jankowski, the partnership’s senior vice president for research, explained. “Of all the nation’s major metropolitan areas, we have become more export-dependent than any other.”
Trump made his name by insisting that globalization is hurting America. He promised to bring back jobs lost to overseas competition and rewrite global trade rules to give American companies the advantage. And he has not forgotten those pledges.
The Trump administration has demanded that Chinese officials reduce that nation’s trade surplus with the U.S., and Trump has challenged Mexico and Canada to rewrite the North American Free Trade Agreement. The outcome of these negotiations is vital to Houstonians because Mexico is our largest trading partner, and China ranks second.
Houston traded goods worth $23.3 billion with Mexico and Canada in 2017, and our exports have exceeded imports since 2013. NAFTA has been very good for Houston businesses.
The future of the 24-year-old treaty, though, is up in the air. Time is running out for Trump to deliver a new deal to Congress while he still has fast-track negotiating authority, which requires lawmakers to cast a simple up or down vote on a trade deal with no amendments.
House Speaker Paul Ryan had said May 17 was the deadline due to statutory approval processes. And Mexico’s presidential election is scheduled for July 1, and a more hostile president will definitely take power.
Treasury Secretary Steve Mnuchin said last week that talks are ongoing, but U.S. Trade Representative Robert Lighthizer said the three sides are nowhere near a deal. That leaves Trump to either seek extensions to both the talks and fast-track authority, reach a so-called skinny deal that only makes minor changes, or to declare that the U.S. will withdraw from the treaty.
The Trump administration is reaching a similar dilemma with China, which has refused the president’s demands to fundamentally revamp its 10-year economic plan to supplant the U.S.
Houston’s trade with China totaled nearly $19 billion last year, up 700 percent since 2003. But if the Trump administration carries out its threat to impose $150 billion in tariffs, and China retaliates as expected, Houston’s trade with China will plummet.
Houston companies are already suffering from steel tariffs Trump imposed earlier this year. Steel is fundamental to the oil and gas industry, and the tariffs have sent prices for some material skyrocketing.
“We import $6.8 billion worth of steel from 95 countries, and we put tariffs on steel to protect American jobs and U.S. manufacturing,” Jankowski said. “There are only 89 companies in Houston that somehow manufacture or process steel, while there are 2,000 companies that somehow use steel in their work.”
The tariffs will help protect 2,200 Houston jobs, but place 88,834 at risk, according to the Greater Houston Partnership.
Students of our president know that he prides himself on bombastic and unpredictable negotiation techniques. Like every good negotiator, he knows you need to demand as much as possible in the opening round so that you lose less when you compromise.
Trump on Tuesday also noted that trade talks, particularly those with China, are part of a broader pallet of critical geopolitical issues. A peace treaty with North Korea chief among them.
“Every time I talk to China about trade, I’m thinking about the border (with North Korea),” Trump said, referring to illicit Chinese trade with North Korea. “We have a very powerful hand on trade … there is a much bigger picture that I have in mind.”
Hopefully, Trump will reach deals that will give Houston greater opportunities to a nearly $60 trillion global marketplace. Dismantling treaties and imposing new trade barriers will only take away from Houston’s success so far.
This column will go on hiatus for the next few weeks because I have taken a temporary editing assignment elsewhere at the Chronicle. But my loyal readers, whom I sincerely appreciate, should not fret, I will be back later this summer with more analysis and commentary.