With the recent signing of the United States Mexico Canada Agreement (USMCA), the U.S. government has strengthened its ties with neighbors to the North and South. The agreement will continue to evolve into streamlining manufacturing and ease cross-border shipping.
U.S. companies assessing their relationship with China have long complained regarding the theft of Intellectual Property and the blatant disregard for legal protections. Additionally, manufacturers who have “purchased” molds and have contracted with Chinese companies find it nearly impossible to obtain these molds if they decide to move their manufacturing to another country.
The Chinese model incentivizes production in country and allows these companies to drive costs to where no competition exists. The use of “cheap” labor means ethical concerns regarding the use of underage employees and overworked conditions.
The recent coronavirus originating in China has stirred an enormous wave of criticism regarding the lack of sharing information. Could the spread of this global pandemic have been contained if other countries were allowed to assist?
American companies have had their heads in the sand regarding some of these issues, and they remain comfortable doing business with China. Is it due to the distance that makes it unrelatable, or the fact that the Chinese claim that all is fine? The recent stir among manufacturing companies in the U.S. is “How do we bring manufacturing closer while continuing to remain competitive?” Mexico has slowly emerged as a manufacturing powerhouse in the medical, automotive, and custom molding industries, to name a few. Labor rates are nearly on par with rising Chinese wages. Skilled labor, competitive labor rates, and location, location, location are very attractive propositions when considering moving production closer to the U.S. The USMCA also specifically addresses the protection of Intellectual Property.
In 1964, Mexico launched the Maquiladora Program which aims to attract foreign investment, create jobs, foster industrialization, and boost Mexico’s economy, especially along the U.S. border. The program, jointly administered by Mexico and the U.S., offers foreign manufacturers tax incentives to invest in Mexico production and labor. Under this program, a standard work environment is established with competitive wages and access to on-site healthcare.
As we begin to see companies change their mindset regarding where they want their products produced, Mexico has become an attractive place for relocating their manufacturing.