2006 News Releases

For immediate release:
October 18, 2006

Media contact:
James Hoard
Phone: (214) 922-5307
e-mail: james.hoard@dal.frb.org

Texas Border Microfinance, RFID Boom and Mexico’s Apparel Exports Focus of Dallas Fed Publication

DALLAS—The latest issue of the Federal Reserve Bank of Dallas’ Southwest Economy examines microfinance in the Texas border region, Texas’ RFID boom and the effects of trade policy on Mexico’s apparel exports.

In “Incubating Microfinance: The Texas Border Experience,” assistant economist Laila Assanie and economic analyst Raghav Virmani find that the Texas border region is prime for microfinance initiatives.

“Despite its minimalist approach, microfinance can play a significant role in economic development and complement the larger-scale efforts in promoting education, infrastructure development and business investment in the Texas–Mexico border region,” the authors write.

The number of single-person microenterprises along the Texas border grew by 113 percent between 1992 and 2002, according to the article.

Microfinance groups such as Acción Texas are finding success in the area, increasing its portfolio with a 90 percent loan repayment rate.

The importance of microfinance to development was recognized last week with the awarding of the Nobel Peace Prize to the movement's pioneers—Bangladesh economist Muhammad Yunus and Grameen Bank, which he founded in 1976.

Former Dallas Fed board member Julie England—vice president and general manager of Texas Instruments’ radio frequency identification (RFID) business—discusses the expanding RFID industry in “Charting the Course for RFID.”

The Dallas–Fort Worth metroplex has emerged as a major player in the RFID industry with more than 121 companies working on some aspect of the technology, according to England.

RFID allows companies to increase efficiency in supply chains and lower labor costs. Future applications include the imbedding of RFID chips in a cell phone antenna to act as an electronic payment device.

“We’re going to want to take our payment instruments and use them when we travel anywhere in the world,” England says. “So consumers will join retailers as future drivers of RFID-enabled functions.”

In “NAFTA, Trade Diversion and Mexico’s Textiles and Apparel Boom and Bust,” vice president and senior economist William C. Gruben discusses how U.S.–Mexico apparel trade has been affected by changes in U.S. trade policy with respect to other apparel exporters, such as China and the Central American countries.

As Gruben explains, NAFTA gave Mexico special trade privileges that facilitated its apparel exports to the United States. He argues that other apparel exporters to the U.S. could have undercut Mexican prices had they shared these privileges. At the start of the current decade, some of these other countries began to receive trade privileges for their own apparel exports.

Once the United States opened more fully to other apparel exporters, NAFTA’s special benefits were no longer special. Responding to the oft-made allegation that China began to undercut Mexican prices, Gruben notes that China had the lion’s share of the U.S. apparel market before NAFTA went into effect.

He argues that the real question is not how or why China undercut Mexico in the present decade but what allowed Mexico to undercut China in the previous decade.

Find the September/October issue of Southwest Economy online at www.dallasfed.org.