Reshoring to
Texas
Introduction
Texas By the Numbers
Texas has consistently ranked highly in various "best of" lists due to its pro-business regulatory climate, growing population, and abundant assets, which include renowned research universities, a strategic international border, robust transportation options, and dynamic metropolitan areas. Texas has experienced strong economic growth, ranking among the top states in average annual real gross domestic product (GDP) and population growth. The state has diversified its economy and is a global leader in sectors like aerospace, healthcare, biotechnology, professional services, manufacturing, information technology, and logistics.
Yet despite its impressive performance, Texas, like states and nations around the world, remains vulnerable to forces that are often beyond its control. These vulnerabilities were brought into sharp relief by the COVID-19 pandemic, which shuttered many small-to-mid-sized businesses, created massive disruptions to global supply chains, and sent families and communities scrambling to cope with the financial consequences of stay-at-home orders. Along with its abrupt and immediate effects, the pandemic also accelerated several trends that are likely to have long-lasting implications for the state’s economic competitiveness.
#1
State for Exports for 23 Years
#1
State for Solar and Wind
30%
of Semiconductor Market in Texas
10%
of US Manufacturing in Texas
Approach
The Texas Association of Business and Chambers of Commerce Foundation (TABCCF) received a grant from the US Economic Development Administration (EDA) to assess Texas' economic competitiveness and vulnerability to supply chain disruptions. They collaborated with TIP Strategies, Inc., and a statewide steering committee to conduct stakeholder engagement and data analysis. The resulting Texas Competitiveness and Resiliency Strategy offers recommendations to enhance the state's competitiveness and support growth in innovative industries, focusing on talent development, infrastructure, toolkit establishment, and sector-specific actions.
Competitive Context
Texas has a large and growing population but struggles with education and training indicators, particularly in STEM fields and the proportion of four-year degree holders. However, the state offers affordable undergraduate education. It has research universities and innovation centers but lags behind other states in venture capital investments. Texas performs well in total R&D expenditures but falls behind on a per capita basis. The TABCCF Resilience Survey identified skilled worker shortages and transportation bottlenecks as supply chain disruptions, with potential for localizing production to mitigate risks.
Texas has geographic advantages, like its central location and extensive border with Mexico, providing access to diverse resources and markets. However, its ports and transportation systems need consistent investment for maintenance and modernization. Infrastructure concerns, including delays at land ports of entry, must be addressed for sustained competitiveness.
Foundational Strengths
Competing on Texas's Strengths
Texas is home to one of the most dynamic and resilient economies in the world. The state is a premier
destination for jobs, investment, talent, and innovative technologies. Maintaining Texas’ competitive edge
requires new initiatives and investments that address barriers and challenges related to the state’s talent pipeline, infrastructure, regulatory environment and incentives toolbox, and local supply chains. During the 88th Texas legislative session, the Texas Legislature and Governor Greg Abbott took substantive steps to enhance Texas competitiveness in several of these areas.
The recommendations in this plan are designed to strengthen the underlying foundations of the Texas economy, which in turn will make the state more competitive for reshoring opportunities. They consist of four goals under the heading of Competing on Texas’ Strengths.
Strengthen the talent pipeline for Texas employers
Fortifying the talent pipeline for Texas employers is the focus of the first goal. Stakeholders emphasized the critical need for finding and retaining skilled workers, which has become an even more pressing concern in recent times. To meet the current and future demand for a skilled workforce, it is imperative to deepen and expand talent development programs through coordinated efforts and additional resources at the state and local levels. The 88th Legislature created the $3 billion Texas University Fund and realigned community college funding around outcomes and workforce alignment. The recommended strategies and actions encompass various areas, such as aligning workforce plans with Texas competitiveness priorities, improving educational outcomes, expanding dual credit and technical education programs, and supporting entrepreneurship education.
Build a world-class infrastructure for today and future generations.
Rapid economic growth and population expansion have strained the state’s transportation
networks, airports, seaports, rail systems, water systems, electric grid, and telecommunications infrastructure. Ensuring that Texas has infrastructure capable of meeting the demands of a 21st-century economy by addressing these vulnerabilities and preparing for the future economy is the subject of the second goal. The strategies and actions proposed include advocating for increased capacity at border ports of entry, enhancing transportation infrastructure funding, improving utility and telecommunications infrastructure, and supporting energy resiliency and water infrastructure initiatives. Infrastructure investments appropriated by the 88th Legislature included $1.5 billion for rural broadband, $1 billion for a Texas Water Fund, $5 billion for surface transportation, $400 million for Texas ports, and $5 billion for electric generation funding.
Ensure Texas remains the best location in the world to invest and create jobs.
The significance of Texas' pro-growth, business-friendly regulatory environment and competitive tax incentives in driving economic success is highlighted in the third goal. To maintain and enhance the state's advantages in these areas, it is crucial to revamp tax limitation agreement policies for large capital investments, replenish the Enterprise Fund to attract strategic corporate headquarters, maintain competitive R&D tax credits, and continue tax limitation agreement capabilities at the local level. The 88th Legislature passed important legislation to protect and enhance Texas’ business climate. This includes authorizing a new statewide incentive limiting taxable value of certain property (House Bill 5) and passing the Texas Regulatory Consistency Act.
Support local and regional efforts to make supply chains more resilient.
The fourth goal outlines a set of strategies designed to assist EDOs in supporting businesses to become more resilient in the face of supply chain disruptions. The strategies include the following.
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Utilizing business retention and expansion (BRE) efforts to gather information on supply chain issues, suppliers, customers, and potential gaps;
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Collaborating with local manufacturers to map the existing supply chain ecosystem;
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Engaging in targeted recruitment and retention efforts to fill supply chain gaps and diversify the base of suppliers and customers;
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Partnering with industry, government, workforce entities, and education to develop strategies for attracting, retaining, and developing the state's workforce; and
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Working with universities, community colleges, manufacturers, and entrepreneurship organizations to promote supply chain innovation and technological advancements for resilience.
Innovative Sectors
Cross-Cutting Strategies
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Update and expand Texas' research capabilities to identify key areas for commercialization potential.
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This involves providing state funding, building complementary functions, and convening annual conferences. It is also critical for the state to ensure endowment funding for both the Permanent
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University Fund and the newly established $3 billion Texas University Fund.
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Position the Texas Academy of Medicine, Engineering, Science and Technology (TAMEST) as a strategic leader among research institutions to improve coordination and collaboration in critical technology research. This leadership role would include developing industry clusters, creating proof-of-concept and R&D strategic research funds, and enhancing university commercialization and innovation programs.
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Expand future investment in the Governor's University Research Initiative (GURI) to attract star researchers and foster R&D projects with commercial potential. The 88th Legislature maintained GURI funding at $40 million.
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Increase future Defense Economic Adjustment Assistance Grant (DEAAG) funding to attract strategic investments in key technologies and industries. The 88th Legislature maintained DEAAG funding at $30 million.
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Create a deal-closing funds for research consortia to secure leading-edge projects in innovative sectors. The 88th Legislature provided substantial R&D funding for critical sectors, especially microelectronics.
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Deepen Texas-focused angel and venture capital by strategically investing a small increment of state liquid assets into Texas-based alternative investment funds.
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Solidify trade offices and marketing initiatives with strategic international partners to improve trade and investment relationships. As a first step, the 88th Legislature provided $880 thousand in funding to establish a Texas trade office in Taiwan.​​
Sector-Specific Strategies
