Does US investment in international development really benefit the Texas economy?

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It may seem contradictory to say that investing in economic, energy, food and national security abroad benefits the Texas economy, but that was the message at a luncheon hosted this week by the U.S. Global Leadership Coalition in Irving.

U.S. Rep. Marc Veasey of Fort Worth and other guest speakers said policies aimed at promoting democracy around the globe and improving struggling economies create markets for U.S. goods and services and facilitate mutually beneficial trade relations.

The U.S. Global Leadership Coalition is an advocacy group that promotes foreign aid and a robust international affairs budget. Veasey represents Texas’ 33rd Congressional District, which covers much of Fort Worth, as well as parts of Arlington, Irving, Dallas and other neighboring communities. Other speakers included retired Army Lt. Gen. Stephen Speakes and Robin Lerner, president and CEO of the Texas International Education Consortium.

“What brings us all together in this ‘strange bedfellows’ coalition is a shared belief in America’s global leadership, the belief that strategic investments in development and diplomacy are crucial, not only for our economic and national security but to project the very best of American values to the world,” said Luke Wenz, a deputy national outreach director with the Global Leadership Coalition who emceed the event Tuesday. “Over 20% of all jobs in Texas are connected to international trade and more than $400 billion of goods are exported from the state every year, showing just one example of how much America’s investments in the world matter at home.”

Veasey advocated for a national security spending package for Ukraine, the Middle East and Taiwan that is currently in the House of Representatives, arguing that security in those and other areas across the globe translates to national and economic security at home.

“We have a responsibility to make sure that people can grow crops, have food security and safety, they can do these things efficiently as best as possible, as effectively as possible,” he told an audience of about 130 guests. “And if you do that, then you don’t have to worry about, in the future, spending more money on things like bullets.”

Does foreign aid benefit the Texas economy?

To follow up on the economic data provided by the U.S. Global Leadership Coalition to highlight the benefits of the international affairs budget to the Texas economy, the Star-Telegram consulted economists at the Federal Reserve Bank of Dallas.

The beneficial effects of foreign aid on the U.S. economy have been largely accepted by economists, according to Pia Orrenius, vice president of the Dallas Fed.

While she stressed that she did not want to appear to make a statement in support of or against any politician or party, Orrenius said in a phone interview that the most notable example of this comes from U.S. foreign aid in the post-World War II era. Countries like Germany and Japan now rank among the United States’ top five trading partners.

“Economic development among our trade partners helps us, they become our customers, we become their customers,” she said.

This effect has been supported by research from the Brookings Institution, the U.S. Trade Representative and the U.S. Agency for International Development, among others.

The Wilson Center, a Washington D.C.-based global affairs think tank, has also published research supporting statements made by Veasey and others at the luncheon that aid to Ukraine helps the American economy and creates U.S. jobs.

Not everyone, however, sees benefits from international trade.

“Trade creates winners and losers,” Orrenius said. “You do have to have programs that address people who lose from trade, which can displace workers … but overwhelmingly, it’s beneficial for the macro economy, it’s beneficial for consumers and for businesses.”

When asked why he believes the idea that foreign aid benefits economies back home has trouble gaining traction, Veasey told the Star-Telegram that he attributes it to changes in attitudes about the United States’ role on the world stage. Those changes are a response to the false pretenses under which the U.S. went to war in Iraq in 2003, he said.

“There was a level of frustration that came out of that period, especially when the evidence came out that there were no weapons of mass destruction,” he said in an interview. This frustration led to what he called the “inward model” during his speech at the luncheon. He called it an originating factor in today’s America first ideology.

“Now more than ever, people are buying into the, ‘We should just look inward, and we should just be America first, and just be about ourselves,’ but I can tell you that we cannot grow our economy that way, we cannot be safe that way, and that is just not how the world works these days,” he said. “It’s just not feasible. It’s not realistic.”

What is Texas’ role in the global economy?

The group estimates that over a fifth of all jobs in Texas — more than 3.6 million — in 2019 were supported by international trade.

Citing census and Bureau of Economic Analysis data, the group said that in 2020 over 38,000 Texas companies exported goods and that 92% of those were small- and medium-sized businesses. The coalition also noted the more than $375 billion worth of goods exported from Texas in 2021, citing International Trade Administration data.

Some of the data presented at Tuesday’s luncheon may be questionable, Orrenius said, but Texas’ role in the global economy and the benefits it enjoys in that relationship cannot be overstated.

The number of jobs supported by trade and the number of companies, for example, seemed high to her, but she said it all depends on the methodology one uses to link jobs to international trade. It is difficult to figure out, but no matter the methodology, “you’re gonna get really big numbers,” she said.

Still, Texas is the No. 1 exporting state in the country. The $445 billion it exports annually are more than double those of the second largest exporter, California, with $178 billion.

“The more important things are the big things,” said Orrenius. “We’re the No. 1 exporting state in the nation. We depend hugely on being able to export and import.”

Much of this is thanks to some of the country’s most important ports being in Texas. Houston is the third largest sea port in the nation, she said, and Laredo is the largest land port.

“About 40% of U.S.-Mexico land trade crosses via Laredo,” said her colleague Jesus Cañas, a senior economist at the Federal Reserve Bank of Dallas who spoke to the Star-Telegram with Orrenius.

Texas exports to Mexico almost reached $130 billion in 2023, according to the U.S. International Trade Administration.

“Texas is the main intermediary of U.S.-Mexico trade,” said Cañas, “About 75% of US-Mexico trade by land crosses via Texas ports of entry.”