#597 – Despite Fears, Mexico’s Manufacturing Boom is Lifting U.S. Workers
Posted on | The Agurban
Mexican manufacturing production is soaring, but that is not all bad news for US firms. The supply chain for Mexican plants runs through the USA, to the tune of ten times more than if the same product was made in China.
Despite fears, Mexico’s manufacturing boom is lifting U.S. workers
By NATALIE KITROEFF, AUG. 21, 2016
Mexico is in the throes of a manufacturing boom.
Exports from Mexican factories have jumped 13% since 2012. The country already ranks as the seventh-largest producer of cars in the world, and Chrysler, Honda and Volkswagen have major operations there. Over the next five years, another wave of big automakers, including Ford, Audi and Toyota, plan to bring new plants online.
And it’s not just cars. Bombardier, Cessna and Hawker Beechcraft have opened aircraft assembly lines in Queretaro and Chihuahua, Mexico. Plastics and iron and steel exports have steadily risen.
…despite what you might have heard on the presidential campaign trail, Mexico’s manufacturing surge has not been an unalloyed disaster for American workers.
U.S. manufacturing production, it turns out, is rising as well. Factory output has nearly reached its all-time high this year, and is up more than 30% since 2009.
Partly thanks to automation, factory jobs are still way off from their peak of more than 19 million in 1979. But they have been climbing slowly since the end of the Great Recession in 2009. Over the last six years, U.S. manufacturers hired 744,000 new workers, an uptick of 6%.
The bottom line, say economists and company executives, is that what’s good for Mexico’s factory workers is good for some U.S. workers too.
That’s because the chain of goods that supplies Mexico’s factories is very different from the one for China. Simply put, Mexico needs to consume a chunk of U.S. goods in order to make its own.
Around 40 cents of every dollar that the United States imports from Mexico comes from the U.S., compared with just 4 cents of every dollar in Chinese imports, according to the Woodrow Wilson Center. The influx of auto factories in Mexico might sustain hundreds of supplier jobs in Deforest, Wis., or Calhoun, Ga.
“Instead of thinking of Mexico as a separate part of production, it’s now part of our manufacturing process,” said Raymond Robertson, an economist at Texas A&M University. “Mexican companies aren’t just producing products that rival ours, they are producing parts of our products.”
Whereas China’s prowess in electronics and textiles appears to have made a lasting dent on U.S. manufacturing — costing up to 2.4 million jobs from 1999 to 2011, according to one study — trade flows with Mexico have been more balanced.
Multinational manufacturing companies hire an extra 250 U.S. workers for every 100 employees they bring on in Mexico, according to a 2014 study by researchers at the Peterson Institute for International Economics, a nonpartisan organization.
Dean Baker, the co-director of the left-leaning Center for Economic and Policy Research, was an early critic of NAFTA and continues to believe that “it put downward pressure on manufacturing wages” in America.
Still, he acknowledges that the pact had benefits, at least for U.S. corporations.
“It helped the competitive position of our automakers,” he said. NAFTA was “bad, but not as bad for U.S. workers as China.”