Arizona Manufacturer Sees Mexico As Key To Growth
A look at the impact of NAFTA after 20 years.
Every day, he drives from his home in Southeastern Arizona to Calexico, Calif., where he crosses into Mexicali, Baja California.
He comes to supervise a manufacturing plant here for his employer, a small Phoenix-based company called Allied Tool & Die that makes niche aerospace parts.
Twenty years after the North American Free Trade Agreement was signed, cross-border ties are becoming increasingly important to manufacturing on the continent.
It’s part of a trend of growing economic integration between the United States and Mexico.
These days, some six million American jobs depend in some way on trade with Mexico, according to the Woodrow Wilson International Center for Scholars’ Mexico Institute.
Jordan is just one commuter, but he’s part of a long line of manufacturers who have made this trek south.
Since NAFTA took effect, big, multinational companies like Ford, General Electric and Honeywell have expanded their investments in Mexican manufacturing-- in some instances, displacing U.S. jobs along the way.
Jordan’s company followed Honeywell, their biggest customer.
“We visited them here in Mexicali,” Jordan said. “We chose a batch of part numbers and we said we will make these in Mexico for you.”
Two years ago, Jordan opened the new shop. It allows his company to grow by making a few parts more cheaply.
As the company expanded south, it also upgraded machinery in Phoenix so the 100 workers at that plant can make more sophisticated parts.
Here in the Mexicali plant, Jordan has just three Mexican employees who man big, computer-controlled machines. They’re skilled workers who earn a third to a quarter of a typical American wage.
Jordan gestures to where one worker is operating a large machine in the corner that makes rhythmic punching noises.
“That is a press going up and down and it is forming a little piece that will go into the assembly of a jet engine,” he said.
The pieces are made of metal imported from the U.S. From here, the pieces will travel north to a specialized Arizona company for processing and then cross back to Mexicali to be installed into an airplane engine system. They’ll travel again before they are put in a plane.
Because all the parts are North American materials, there are no tariffs when they cross back and forth across the border.
Michael Camuñez, an Assistant Secretary at the U.S. Department of Commerce, says NAFTA has helped grow these highly integrated supply chains.
“You’ll see products that cross the border three and four times or more en route to final production, because there is a value-added component happening on both sides of the border,” Camuñez said. “It is a synergistic relationship that benefits both countries.”
In the last few decades, China’s low wages and costs drew thousands of manufacturers away from North America. But now some companies are returning to the continent —if not to the U.S., then to Mexico.
“Mexico is moving up the value-added chain,” said Christopher Wilson, of the Woodrow Wilson Mexico Institute. “Before, industries like textiles and shoes were very important for Mexico. We are now seeing growth in sectors like the automotive industry and aerospace. These are things that require a greater amount of skill, a greater number of engineers.”
The number of aerospace jobs supplying the global industry has tripled in Mexico in the past six years. Some analysts say that growth could have benefits for the entire continent, since it will generate a demand for supply chains that Canadian and American companies can likely tap into.
“The reality is that we in North America -- Mexico the United States, and Canada, included -- are all competing together as one economic unit in this global economic environment that is increasingly competitive,” Wilson said. “Instead of being competitors, we are really partners in the global economy.”
Back in Mexicali, Bill Jordan of Allied Tool & Die is thinking about those partnerships as critical for the fate of his business, and the aerospace industry in North America. He says the reason his company is trying to expand south of the border is to help ensure the Phoenix plant can stay in business and keep growing.
“That is one of the reasons why we are here and we are trying, is so that the supply chain stays here [in North America]. So we can go back and forth with companies in the U.S.,” Jordan said. “Rather than seeing it leave this side of the world, and go over to Europe or go over to Asia, let’s try see it stay here on our continent, within the NAFTA.”
That’s the common manufacturing mantra heard these days all along the border. There is some boosterism going on.
Yet global manufacturing trends can change quickly. Shifts in exchange rates or intensified violence in Mexico or even some other unpredictable global event could disrupt all this.
But for now, Jordan has room to grow, and is looking for more aerospace clients for his Mexicali plant.