Mexico & Nafta
US economic policymakers on the US side of the border with Mexico are just as keen as their Mexican counterparts on dissuading companies from moving to China.
Nancy Boultinghouse, the marketing director for the McAllen Economic Development Corporation, argues that lots of US companies have realised that the logistical problems created by moving to China more than outweigh the savings they make by shifting production to China. She argues that as logistics have a major impact on the final cost of goods sold in the US, the benefits of shifting from Mexico to China are far from clear cut.
Boultinghouse admits that McAllen and southern Texas as a whole have suffered from Mexico's loss of maquiladora jobs to China. Economists reckon that hundreds of thousands of jobs have been lost: in fact Mexico's maquiladora employment has dropped from 1.3m at the end of 2000 to 1.1m in 2003 before recovering to 1.2m in 2004. The more telling change is probably that between 1995 and 1999 employment in maquiladoras doubled from 600,000 to 1.2m. The official figures show that 900 maquiladoras closed between 2000 and 2003, costing 292,000 people their jobs.
The maquiladora industry began to recover in 2004, and in June recorded its best ever month for exports with sales of US$7.7bn. Maquiladora monitors claim that the industry has already committed to investing US$4.5bn this year (2005) in either expanding existing plants or setting up new facilities.
These maquiladora monitors say that companies are coming back to Mexico because they have had unfortunate experiences in China. Some say that China's infrastructure lags behind Mexico's. Several claim that China's chequered record in respecting intellectual property is another drawback. Others say that the strength of the Mexican peso against the US dollar means that the local market is more attractive to them than China's. Mexican policymakers have also done their bit by delaying the introduction of tariff changes which could have deterred Asian companies from investing.
Boultinghouse told a Mexican newspaper, Reforma, that the main reason for the pickup in maquiladoras was simply logistics. It was much cheaper to ship goods from Mexico to the US than to ship them from China. She said that the heavier the product, the more competitive Mexico became. She claimed that Mexican-built cars were cheaper than Chinese-made ones because of the cheaper delivery costs and that the same was true for fridge-freezers.