Free Trade. It matters. by Jorge
Canavati
Today,
the United States has a record in manufacturing and exporting. International
trade being a primary cause for this growth. Trade is a fundamental creator and
supporter of jobs. It is not possible to manufacture and export if you do not
import. Parts, raw material, technology, services; whatever component necessary
to manufacture. Trade. Pure and simple. The act of moving one ocean container
of imported goods at a U.S. seaport supports three jobs. 2013 numbers show
that U.S. export alone supported close to 11.5 million jobs. Trade with Mexico
supports almost half of this number! “Made in USA” jobs really matter. During
that year, the U.S exported to over 230 countries. Though more than a third of
that was to Canada and Mexico. Think about that. North America supplies itself.
An exemplary trade bloc.
NAFTA is not about the U.S. selling a
television set to Mexico or Mexico selling an automobile to the United States.
The complete and absolute supply chain and market are symbiotic. One cannot
exist without the other. Any interruption at all will cause economic damage and
fierce job loss, especially in the United States.
It
is very easy and popular to point fingers at other countries when there is a
shift in manufacturing jobs. Don’t blame other countries. Blame the R2D2’s and
C3PO’s. Take General Motors, for example. GM is cranking out more automobiles
than ever before with less workers. What is going on? More with less. This
means technology and automation are the culprits for jobs fading away. Yes,
manufacturing has come back from the far east, (the famous “re-shoring” term),
but to highly automated manufacturing. Steel once made in China is now being
made here again at very sophisticated high tech the mini-mills using scrap. By
2020 the United States will be the most competitive country in the world as is
relates to manufacturing and mostly with high tech automation. The economics
are better than re-training a person. And on a positive note, confidence
in the U.S. economy has caused healthy foreign direct investment. The job
creation caused by this in combination with other things has offset whatever
jobs migrated out of the U.S.
We
also like to use the term “cheap labor” when we refer to Mexico or other
countries. This needs to be put into perspective. Cheap labor has a sweat shop
connotation to it. Mexico, for example has very strict labor laws. And costs
are more in tune to economies of scale thank “cheap labor.” Ironically, as
the peso slides due to the pessimism in the market triggered by the grim
rhetorical climate on trade, it makes manufacturing there more cost effective.
I
am a big supporter of Bi national Shared Production. A plant in Mexico or the
U.S. has an intrinsic supply chain value creating bi national jobs and growth.
Let’s take Toyota Motor Manufacturing of Texas (TMMTX) for example. This plant
located in San Antonio assembles Tundra trucks. The supplier of chassis is in
Monterrey Mexico, the chassis are brought up on rail to the plant located in
San Antonio, Texas. This must be an efficient rail service for such critical
components to make it on time. Air cargo services have been developed for
automotive parts. The tier suppliers on the TMMTX campus and their suppliers not
only supply the San Antonio plant but supply automotive plants in Mexico. Parts
manufactured in Mexico supply the Toyota plant in San Antonio as well.
Partially assembled components cross the border multiple times. This is not
endemic to San Antonio. Other plants in Mexico and the U.S. are all
interconnected to include other areas of the world as well. Manufacturing,
trade and job creation are integrated in North America. Symbiotic supply
chains.....
And
I have yet to touch upon the most important player in all of this: the U.S.
consumer. Competitive prices at retailers are due to trade. Ask Wal Mart.
By the way, Wal Mart is not a retailer but a very sophisticated, well
lubricated logistics machine. Therefore, your automobile costs you thirty thousand
dollars and not eighty thousand dollars. Threatening manufacturers that may
migrate a plant to another country with heavy tariffs only raises the cost to
the consumer. The recent Ford decision to move some manufacturing to their
Mexico plants was a decision based on the need for re-tooling one plant in the
U.S. for a newer model. Manufacturers that have plants throughout the world
have a grander vision of how things should work. It is not one against the
other. Things are one. This is globalization. These organizations see what
is beneficial between regions. Protectionism can make all this come to a
screeching halt. Protectionism is a strong basis for abysmal recessions in
economies. And South Texas should be worried.
Let’s
take Corpus Christi for example. In recent years, this Texas city has been a
success story in attracting domestic and foreign direct investment. Over 40
billion dollars have been invested here recent years. Manufacturing and
energy company from all over the world have invested here for various more many
reasons: 1) a friendly business environment, 2) labor availability 3) cheap
gas, 4) excellent logistics and 5) a closeness to Mexico a major trading
partner. Corpus Christi is becoming a primary supplier of natural gas to Mexico
and primarily to Monterrey, a top industrial center in the country and a key
component to north American business. Gross shifts in trade policy can and will
affect manufacturing which in turn will affect the supply of fuels to places
like Monterrey. Not to mention the effect on jobs created by this foreign
direct investment.
Other
advancements in bi national trade will certainly be damaged. Let’s take
for example, the U.S. Customs-Mexico Aduana recent protocols. Though both
countries have shared cooperative protocols in the past, such as bi-national
agricultural export inspections. The most recent agreements regarding customs
has special significance. For the first time in history Mexico customs is on
U.S. soil clearing automotive parts at the Laredo International Airport bound
for Mexico. Thought this operation is small it has teeth. First, it is air
cargo which basically guarantees non-tampering security in pre-cleared
goods. The good arrive to Mexico already Mexico customs cleared. This
project is a prototype and by no means is it endemic to Laredo. In the
foreseeable future, this project may very well be done on inter modal
transportation from other parts in the U.S. such as Chicago. In other words,
Mexico customs will clear goods from the manufacturing or distribution source
in a secure location in Chicago, then the cargoes will be securely transported
to destination within Mexico already customs cleared. And by the same
token, U.S. Customs is now in Chihuahua clearing cargoes bound for the U.S. and
for the first in history though under very strict conditions and protocols, the
U.S. agents are armed. Mexico adjusted laws for this to happen. Until recently
this was unheard of. Great examples of bi national cooperation in trade. This
could all vaporize under a protectionist umbrella.
It
is also very naïve and foolish to believe that other countries will be willing
to buy U.S. goods without reciprocal arrangements. The rhetoric today is very
confusing to people. We hear how the incoming government will support U.S.
agriculture. And at the same time, we hear of the abandonment of the trans
Pacific Partnership which is a huge booster to U.S. agriculture. By the way,
agriculture in the U.S. is suffering due to a lack of U.S. workers willing to do the jobs. U.S. farmers are obliged to bring in
workers from Mexico and other places on temporary HIB-A work visas to get the
fruits and vegetables to your table. Go figure.
A
renowned air conditioning company has their plant in Monterrey with the
distribution center in San Antonio. This not only helps consumers keep their
homes cooled here at competitive
prices
but it has more than supported various U.S. trucking companies in business in
transporting the units to the U.S. market the drivers are thankful for the work
and jobs. I attend the San Antonio Transportation Association monthly
luncheons as much as I can. And without fail, the trucking companies attending
are always looking for drivers. There is a lack of drivers in the United
States. And as manufacturing and trade grows so will the need for these jobs.
These are good paying, honorable jobs. So, if a manufacturing plant
migrates, re-training is in order. As well as reassignments. Jobs abound
in the United States. Ed Rendell, the former governor of Pennsylvania has
a precise view on this. But to be honest, the part of society involved in open
and free trade which is a minority, has done a very poor job in educating and
sharing information with John and Jane Q. Public. Me included. We have behaved
like elitists. We have done too little too late in promoting and marketing
trade in a way that is acceptable to society. And this is when populism rattles
its sabre.
####
Sources:
· “Why
Robots, Not Trade, Are Behind So Many Job Losses”, Paul Wiseman AP Nov 4, 2016
· “The
Role of Exports in the U.S. Economy” An economic report of the U.S Department
of Commerce May 2014
· U.S.
Trade Representative website.
Jorge
Canavati is the principal at J. Canavati & Co. LLC. An international
consulting, agency and commercial representation firm. He lives in San Antonio,
Texas
Mr.
Canavati has over 30 years of experience in International Trade, multimodal
transportation, air cargo and logistics. He is the author of various articles
and editorials on Mexico and world trade and transportation issues.
Mr.
Canavati is on the board of various international trade organizations and is
the official U.S. representative of the National Importers and Exporters
Association of Mexico (ANIERM). He serves on the Border Trade Advisory
Committee (Texas Transportation Commission) appointed by Texas Secretary of
State Hope Andrade and re-appointed by Secretary John Steen. He serves on the
Camino Real District Export Council, appointed by the U.S. Secretary of
Commerce. He was recently appointed to the board of the San Antonio-Mexico
friendship council and nominated to the San Antonio Business Journal Who’s Who
list in Energy Logistics.
He
lectures at various universities and participates on various high level panels
per year at international trade events. He has been married for 33 years to
Daisy Miriam and has two children, Jorge Mauricio 30 and Gabriela Sofía 28 and
a gorgeous granddaughter Penelope Michelle of 9 months.
