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backGLOBALtalk April, 2012

As US-Mexico Trade Booms, Border Area Draws Jobs Away from China

Trade between Mexico and the United States is booming.

About $420 billion in goods passed through U.S./Mexico ports of entry last year, an 18 percent increase from the previous year, according to Bob Cook, president of the Regional Economic Development Corporation (REDCo) in El Paso, Texas. And border towns like El Paso and Ciudad Juarez saw a whopping 47 percent increase from 2009 to 2010.

Economist say the uptick in trade is because of one simple reason: Americans are buying more. “We see a pickup in trade when we see more consumption taking place in the U.S,” said Cook.

Americans are buying more smartphones, laptops and tablets like the iPad. And a large number of those products are being produced in Mexico – then sold off to American consumers.

And this means that new jobs are being created on both sides of the border.

Rising wages in China, currency appreciation, and ocean-freight costs from Asia are a major factor for overall production costs, according to research conducted by AlixPartners, a global business-advisory firm. And that means more and more manufacturing work is going to the US/Mexico border area.

“Despite security concerns in Mexico, the country has a lot of appeal right now because of its proximity to North American demand and the continuing need of many companies to improve their working-capital positions,” said Chas Spence, a director in the Latin American Manufacturing Practice at AlixPartners.

Matt Keats, president of Keats Southwest, a metal stamping company in El Paso, said the boost in trade has helped his company grow.

“Some companies left Mexico and went to China, so those are either coming back or the (companies) that stayed (in Mexico ) are getting busier,” said Keats.

About 95% of Keats’ products manufactured in El Paso are exported to Mexico, Keats said.

The demand is showing some slight growth in his operation.

“We have started to hire (people) back,” he said.

Their El Paso and Chicago offices have added 30 positions after an increased demand of more products.

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The importance of trade between the two countries – Mexico is the United States’ second largest trading partner – was summed up recently by David Aguilar, acting commissioner for the U.S. Customs and Border Protection, during a recent visit to El Paso.

“The community of the trade, to me, is literally the economic engine to our country’s economic vitality,” he said.

But economists are quick to point out that, though new jobs are growing, the number is still short of what is needed.

“We are still not back to pre-recession levels,” said Dr. Pablo Camacho, assistant professor of economics at Texas A&M University International, referring to jobs directly-related to trade in Laredo, Texas, a city with the busiest port of entry in the country.

Camacho said that the Bureau of Labor Statistics recorded that in 2008 there were over 10,500 transportation-related jobs, including truck drivers and transportation support staff workers in the Laredo area. In 2010, that number dropped to 9,483.

There were also a dip in the number of warehouse employees, from 764 in 2008 to 684 in 2010 in the Laredo area.

Mexico Fighting Machismo with Minis

The trade increase comes even though the country is in the middle of a bloody, multi-year drug war that has given the country’s image a black eye. Yet, much of the trade passing through the El Paso ports of entry comes directly from the cartel-plagued city of Ciudad Juárez.

“In Juárez we have 360 manufacturing operations, 85% of which are making products for U.S. consumption,” said Cook of the development corporation.

Experts say the daily killings and gang violence doesn’t seem to be hampering the country’s growing manufacturing industry. That’s because the companies don’t manufacture guns, knives or cash.

“(The manufacturing) industry doesn’t have what cartels need,” Cook said.

Source: Fox News - GAI

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