Exported retail sales along the Texas‐Mexico border

Abstract

Trade between the U.S. and Mexico has boomed over the past 10 years due partly to the significant reduction in tariffs from the North American Free Trade Agreement (NAFTA) and the strong growth in the maquiladora industry. While commercial trade between the countries is well documented, less is known about the size of the cross‐border retail trade that occurs. Though the size of this activity is small in comparison to commercial trade, it is a significant part of the economies of many border cities. In 2005 alone, there were more than 45 million non‐commercial crossings at the bridges along the Texas‐Mexico border. Many of these individuals were coming to purchase goods to take back to their home country. Since most of the retail trade conducted on the U.S. side of the border is done in cash, it is difficult to document the share of retail spending accounted for by Mexican nationals. In this article we use several techniques based on a simple consumption function to estimate the size of retail spending that is essentially exported to Mexico via cross‐border shoppers. We then check our estimates of the proportion of retail sales going to Mexican nationals in the Texas border metros to see if they are consistent with the impacts to retail sales of movements in the real peso‐dollar exchange rate.

Notes

Coronado is an Assistant Economist at the Federal Reserve Bank of Dallas, Houston Branch in Houston, Texas. Phillips is a Senior Economist and Policy Advisor at the Federal Reserve Bank of Dallas, San Antonio Branch in San Antonio, Texas.