Nearshoring to Mexico Defines US-Mexico Relations
In the 1990s, the US saw a mass migration of manufacturing and other industries to China and other Pacific Rim countries. Offshoring became the trend, as producers sought to reduce costs and take advantage of vast numbers of inexpensive human capital in Asia. Now, however, nearshoring to Mexico is the trend. And this symbiotic partnership between US industry and Mexican industry has come to define US-Mexico relations in the 21st century.
Nearshoring to Mexico
Nearshoring to Mexico is replacing offshoring more and more in recent years. Wages in China are increasing rapidly, executives are weary of trying to work with time zones many hours behind their own time, and the cost of maintaining such long supply chains is increasing. A decade ago, the trend to offshore production to Asia began to shift back to North America. These jobs are still outsourced, but nearshoring to Mexico makes a lot more sense for several reasons:
- Mexican labor is more skilled on average.
- Mexican labor costs remain steady and relatively low.
- Nearshoring to Mexico means time to market is decreased, down to days or even hours.
- Mexico has some of the strictest codified and enforced intellectual property laws in the world, affording more protections to technology companies.
- With such close proximity to US companies, administration is simpler and more cost efficient.
- Mexico not only allows for duty-free imports and exports with the US, the Latin American country, which boasts over 40 free trade agreements with key international markets, also grants US companies the same favorable tariff access to markets all over the world.
- Nearshoring to Mexico supports US jobs, as a significantly large share of inputs used in Mexican manufacturing is sourced from US manufacturing.
Making Mexico Simple
Companies that are inspired to review manufacturing in Mexico are confronted with what seems to be a mountain of complexities. This is true if a company new to Mexico chooses to venture into Mexico on its own. As an alternative an industry described as SHELTER SERVICES has developed that makes Mexico simple. In fact, at Tecma, a U.S. owned Shelter Service, it is said that a move to Mexico can be no more difficult than moving a plant from one side of town to the other side.
The US-Mexico Partnership
The defining key to US-Mexico relations lies in understanding the two North American countries as regional partners in a global marketplace and not as competitors. The two manufacturing countries share much in common and have complementary assets. For example, there is a shortage of skilled welders, machinists, and toolmakers in the US, but in Mexico, such trades abound. While the US provides engineering and strategic roles, Mexican labor provides skilled manufacturing and low-cost manpower. It is crucial to US-Mexico relations to view the trend of nearshoring to Mexico as a strengthening of the already intricately linked economies of both the United States and Mexico.
The United States-Mexico-Canada Free Trade Agreement will boost the North American auto industry and will affect labor relations