Texas is one of the best states for businesses to weather economic challenges brought on by COVID-19.  As reported by InnovationMap, a new study from Fit Small Business ranked Texas #3 when it came to business owners weathering the economic fallout from the pandemic. Ohio and South Dakota ranked #1 and # 2 respectively. New York was last.   Click to expand The study analyzed several metrics, including infection rates, consumer confidence and overall financial health. Texas ranked #1 in the Emergency Reserves & Relief category, which considered the overall reserve of funds the state has to help provide financial relief to those affected by the pandemic. The study noted the state's adequate economic reserves and unemployment compensation. Authors also cited an article by Richard Fisher, former president and CEO of the Federal Reserve Bank of Dallas, who called Texas "the case study for economic recovery from the COVID-19 recession."  The study also pointed to the state's diversified economy, noting it as a key aspect of a state's ability to recover, and said while Texas has felt some affects of the economic downturn, it has enough resources to weather the storm.  See the full study and results from Fit Small Business. Learn how Texas compared to other states in each of the categories here. Learn more about Houston's diversified economy. Read more about Texas's business-friendly environment in the Houston Regional Market Profile.  Register for the next Greater Houston Partnership Economy Series. Patrick Jankowski, the Partnership's Senior Vice President of Research, will share a broad overview of major economic impacts from the first half of 2020 and the outlook for the rest of year.

The COVID-19 pandemic has had an unprecedented impact on the global economy, and on the economies of individual cities around the world. As the Energy Capital of the World and the top metro exporter in the U.S., Houston faces unique challenges and opportunities when an event threatens the well being of global supply chains.  This week, the Partnership hosted an exclusive Business Beyond Borders webinar exploring the impact of COVID-19 and the downturn in oil and gas on global supply chains and the related effects on Houston's economy. Topics included the pandemic’s impact on global trade, current trends, and how to best utilize customs programs to mitigate current risk and plan for recovery.   Dominic Sun, Director of Trade Development at Port Houston, kicked off the program by providing a timely update on current activity at Port of Houston and the changing business dynamics due to the COVID-19 pandemic. Below are key takeaways: Port Houston Volumes Remain Strong Port Houston welcomed nearly 3.5 million tons of cargo in May of 2020, about 13% below the volume handled in May 2019. However, total tonnage YTD is only about 5% lower than the same period in 2019.  As the largest port in terms of breakbulk tonnage, Houston's numbers are largely predicated on how the steel industry is doing. Tonnage steel import is down considerably YTD, 47% when compared to last year.  It is important to note that the changes we see here are not largely due to the pandemic, but to the Section 232 tariffs along with the downturn of oil prices. A bright spot at the terminals is that other general cargo, such as aggregates, grains, cement, etc., is moving quite briskly. The port is seeing increase of 20% when compared to YTD last year.  Overall container volume remains strong, with YTD volume trending 1% above last year. This is largely driven by the decrease in announcements of blank sailings from 9 in March/April to only 2 in July. Import/Export Balance Close to 50/50 Over the last 20 years, there has been a concerted effort to better balance imports and exports.  51% of our total exports are largely driven by polyethylene, which is a commodity that has continued to move at a considerable pace. The downturn in demand of consumer goods has been largely offset by the increased import of non-perishable and essential items such as PPE, medical supplies, etc.  Trade with East Asia has been Port Houston’s largest driver of import growth since 2010 with an increase of 16.5% year over year.  Infrastructure Investment Continues Despite Pandemic There were over $36 million in projects approved last month.    Over the next 10 years, there is an estimated $1 billion in investment planned for container terminals.  Another $1 billion in investment is planned for the widening and deepening of the 52-mile Houston Ship Channel, a project which is moving along at a fast pace.  The channel widening project with upstream deepening will allow for two-way traffic along the ship channel and is a top priority for Port Houston.  The program continued with Michael Leightman and Ryan McNeil from Ernst & Young, who discussed international trade and supply chain dynamics in response to COVID-19. Below are key takeaways: Global Trade Disruption Due to COVID-19 The pandemic has put further strain on an already stressed system of global trade, as well as exposed many areas of concern for governments to consider. This is particularly true when one looks at the immediate and deep impacts experienced by complex, multi-country supply chains.  The pandemic has brought tremendous challenges to trade, and will continue to disrupt companies’ operations, planning and results in the near and medium term as governments formalize and implement policy responses. For these to be effective, they must be efficient, coordinated and global in nature. The last few years have seen a surge in trade uncertainty after 20 years of stability, which can be largely attributed to uncertainty related to U.S.-China trade tensions escalating and Brexit.  USMCA Under COVID-19 USMCA (U.S.-Mexico-Canada Agreement) was renegotiated in seven rounds over a period of 13 months and will replace NAFTA, which has been the North American trade agreement in place since 1994. Trade disruptions have impacted companies planning for the new trade agreement, which will go into effect on July 1st. Key changes to the agreement include: Investor-state dispute resolution mechanism has been eliminated between the U.S. and Canada.  USMCA will remain in effect for a period of at least sixteen years, the terms of the agreement can be revisited after six years of enactment to be potentially extended for sixteen more years if all parties agree.  Certain labor conditions must be met by the parties to the treaty, including freedom of association, recognition of the effective right to collective bargaining, or elimination of forced or compulsory labor. Key changes are perhaps most evident in the automotive industry.  Trade Outlook for the Remainder of the Year In a year where we have already seen a pandemic bring the global economy to a near halt, we cannot lose sight of the myriad trade developments around the world that will continue to impact global supply chains: Trade agreements, including those between the US and other countries like the UK, EU and Japan. Tariffs on steel and aluminum. Disputes with the World Trade Organization over concerns that there has been unfair treatment towards the US in several cases. The importance of US and China to stay committed to the Phase I agreement that was signed in January of this year. The long-term impact of plummeting oil prices to the global energy sector.  The upcoming US presidential election.  Ernst & Young suggests the following three priorities for businesses trading goods through the COVID-19 pandemic: Cash release—supporting opportunity follow through and meeting of financial obligations. COGS reduction—protecting profitability and increasing sales flexibility in economic turbulence.  Supply chain continuity—ensuring goods continue to move when others are unable to supply.  Utilizing Trade Programs to Capture Savings One major way to tackle issues related to tariff impact mitigation and duty savings is through the utilization of various customs trade programs. Trade programs provide users with the ability to reduce, defer and in some cases completely avoid tariff impact and recoup certain duties already remitted. Notable programs include: Foreign Trade Zone (FTZ) Program— allows activity to occur in the US prior to the application of US custom laws, thereby equalizing the customs treatment of the activity with similar activities occurring offshore. Free-Trade Agreement (FTA) Program—reduces import and export trade barriers between two or more nations, which can create opportunities domestically for producers and consumers and help to grow the US economy. Duty Drawback—allows for refunds of the duties, taxes, and fees paid on imported merchandise, which were imposed under federal law upon entry or importation, when that merchandise is exported or destroyed. In times of economic uncertainty, it is critical to build partnerships with businesses and organization that have synergies and like-minded goals. Programs such as FTZ are key for the global competitiveness of domestic manufacturers and the growth of our domestic economies.  Partnering with local chambers of commerce and economic development organizations can expand awareness and proper use of customs programs.  The program concluded with Shane Williams, Director of Economic Development at Port Houston Authority, who discussed opportunities to leverage Foreign Trade Zones in the Greater Houston region. Shane oversees the Port Authority’s Foreign Trade Zone #84, which is the largest FTZ in the United States. Below are key takeaways: Recovering from Trade Disruptive Events Foreign Trade Zones can help economic recovery from the current economic crisis.  FTZs have a proven record as effective engines for local economic development and job creation and can be a successful counter to trade protectionism.  The benefits and flexibility that FTZs offer can help repair and strengthen global supply chains and revive international commerce more quickly.  Grantees of FTZs can leverage relationships with zone companies to identify their needs and how to better recover from disruptive events.  Port Authority’s Foreign Trade Zone #84, the largest FTZ in the United States, offers over 60 sites.  Advantages of FTZ during COVID-19 Weekly Entry Process—by combining multiple shipments into one single entry, the company only has to pay one merchandise processing fee (MPF) once per week. For a company who has numerous shipments, this could result in as much as 85% savings on processing/entry fees.  Third-Party Logistics (3PL)—provides a company with outsourced logistics services so that the customer does not need to pay the tariff upfront while they are looking for a market for re-export.  The Port of Houston Authority is currently working with the National Association of Foreign Trade Zones (NAFTZ) to identify available FTZ space across the country. They are also working with our local Customs and Border Protection (CBP) to find ways to provide the necessary expedited services for companies, including authorization documentation, letters, contracts, etc.    Explore Ernst & Young's Global Trade Tracker and the Trade Watch 2020.  Visit the Port of Houston to explore the benefits of Foreign Trade Zones to learn more about the Houston Ship Channel Expansion Project.