Don’t miss the latest installment of the Allamakee County Chronicles over at Glibertarians!
This recently in from the folks at Forbes: New Data Shows U.S. Companies Are Definitely Leaving China. Excerpt:
Global manufacturing consulting firm Kearney released its seventh annual Reshoring Index on Tuesday, showing what it called a “dramatic reversal” of a five-year trend as domestic U.S. manufacturing in 2019 commanded a significantly greater share versus 14 Asian exporters tracked in the study. Manufacturing imports from China were the hardest hit.
Last year saw companies actively rethinking their supply chain, either convincing their Chinese partners to relocate to southeast Asia to avoid tariffs, or by opting out of sourcing from China altogether.
“Three decades ago, U.S. producers began manufacturing and sourcing in China for one reason: costs. The trade war brought a second dimension more fully into the equation―risk―as tariffs and the threat of disrupted China imports prompted companies to weigh surety of supply more fully alongside costs. COVID-19 brings a third dimension more fully into the mix, and arguably to the fore: resilience―the ability to foresee and adapt to unforeseen systemic shocks,” says Patrick Van den Bossche, Kearney partner and co-author of the 19-page report.
The main beneficiaries of this are the smaller southeast Asian nations, led by Vietnam. And thanks to the passing of the U.S. Mexico Canada Agreement, Mexico, for all its problems with drug cartels, has become a favorite spot for sourcing.
Pay special attention to that last sentence; that’s the real prime pickle in the barrel. China’s reticence in spreading the word about COVID-19 is the last straw in a bale that’s been weighing down the camel’s back for some time now. As the linked article continues, one of the primary beneficiaries of this will be our southern neighbor:
Mexico is the China of the Americas.
Kearney introduced its Near-to-Far Trade Ratio (NTFR) this year. It tracks the movement of U.S. imports toward nearshore production in Mexico. The NTFR is calculated as a ratio of the annual total dollar value of Mexican manufactured goods to the U.S., divided by the dollar value of manufactured imports from the Asian 14, including China.
Since 2013, the NTFR has hovered steadily between 36% and 38% —meaning for every dollar of U.S. manufacturing goods from Asia, there were approximately 37 cents worth of manufacturing imports coming from Mexico.
That changed with the USMCA.
Mexico has gone from 38% to 42%. On a dollar-value basis, total manufacturing imports from Mexico to the U.S. increased 10% between 2017 and 2018, from $278 billion to $307 billion, and by another 4% between 2018 and 2019, to a total import value of $320 billion, based on the Kearney report.
Now, think about our ongoing problem with the southern border. Neither of our major political parties seem to want to do much of anything about the flow of illegal immigrants, but it seems to me that one of the best ways to reduce that flow is to have a Mexico with plenty of good-paying manufacturing jobs to offer.
We’re already seeing the start of this. I’ve been in a few massive manufacturing facilities in Reynosa and Guadalajara. The folks working in those plants, generally owned by American companies, were well-paid (by the standards of the region) and had benefits their American counterparts lack, such as free cafeteria lunches and an on-site medical clinic.
I’m liking this trend. I’m liking that even some folks in the Imperial government are talking more incentives to encourage it, although I’d much rather that they butt the hell out and let companies decide for themselves where to open plants; these are, however, the conditions we’re faced with.
And honestly, I wouldn’t mind seeing the Chinese Communists taken down a peg or two.
