The New Economic Landscape
U.S. company executives of manufacturing have to continually move with the times and adjust to growing changes in the world as technology changes. The shortage of workers results in an increase in labor costs, and a demand for skilled workers intensifies and escalates into an everyday concern.
- Moving operations to Mexico caused fewer skilled workforce and current labor workers that are left in the U.S. manufacturing plants, which are producing the goods and services, are now demanding higher pay for their trade and better benefits.
Why U.S. Companies are Repositioning Product Strategy and Moving to Mexico
Many companies in the U.S. feel continued pressured to reduce expenses as labor costs account for as much as 70% of the total business expenditure, which includes employee wages, benefits, and payroll.
Finding highly skilled production workers with the right technical expertise, industry knowledge, understand manufacturing methods, and are educated in their field.
Acquiring real-world experience and know-how in various production and warehouses is challenging and hard to come by and at an affordable price.
- CEO’s need to be creative and think outside the box when it comes to delivering the product – competition is fierce, and growing labor costs push U.S. executives to move their facility to Mexico.
- S. ties to its neighboring country Mexico became an attractive global commerce decision and would help in cost-effective and efficient measures and has a positive impact on business in saving money, reducing overall spend and securing growth and product expansion.
- Mexico’s minimum wage is significantly lower than the U.S. minimum wage and has drawn American companies to leave the U.S. in favor of a more stable work environment. The proximity to Mexico and having warm weather all year round is attractive for U.S. executives.
Trump gives NAFTA a Makeover and was ReBranded as USMCA
The Renegotiation of NAFTA and the New US-Mexico-Canada Agreement Trade Deal (USMCA)
Changing the conflicting views people have of the NAFTA agreement came with apprehension. Getting everyone on board from democrats to republicans was even tougher as people were worried and concerned about their jobs.
In recent political discussions, Trump has been very vocal and has made it clear to bring back U.S. companies from Mexico. He has made it difficult for companies to move their facility to Mexico with even more stringent policy changes.
His slogan “Let’s Make American Great Again,” has definitely stirred up much controversy in corporate America and in the United States.
Yet Trump had made it his mission to revamp the trade agreement when he was in office – and to lower the trade deficit between the United States and Mexico.
- The agreement created more than 25 years ago, the rebranding was inevitable and expected since it shook up congress and had many politicians’ worried. It took three U.S. presidents and ten years to get NAFTA in place and signed, the appeal is still there and beneficial for the United States and Mexico.
The idea of free trade was a difficult concept for the democrats and the republicans. Yet, it took the vision of President Ronald Reagan, who originally started it, and while President H.W. Bush negotiated the global specifics by lowering trade barriers among the countries – envisioning the expansion of supply chains.
However, it was replaced by USMCA as a way to better control trade. It created a much-needed facelift with fairer trade, freer markets with stable economic growth in North America.
- According to the office of the United States Trade Representative website, the new trilateral USMCA agreement was a mutually beneficial trade deal that is effective, modernized and makes sense for all three countries involved. It will pave the way for fairer trade, freer markets, and a more robust economic growth for North America.
- The agreement shared by these three countries U.S., Mexico, and Canada, moved from NAFTA to USMCA with critical changes. It will remain for 16 years; after that time, all three countries can renegotiate the terms or withdraw the agreement.
Companies will continue to move operations to Mexico due to how simple and easy it to manufacture in Mexico. Labor costs are dramatically low, with companies being able to save 30% on the workforce, with the high talent, expertise, and work proficiency among the Mexican labor force, with more than 110,000 engineers graduating in Mexico.
However, it doesn’t come with some significant risks and challenges, and companies need to do their homework, research, and talk to companies who have had much success.
- The Mexican government has invested in training, education, and trade schools and has encouraged its people to acquire technical skills and more education as the government provides hand-on experience.
- S. companies have a wide range of highly skilled engineers, warehouse managers, skilled craftsmen, manufacturing engineers with Mexico’s increasingly growing workforce of qualified workers.
Before a U.S. company moves to Mexico, they need to get educated and know the facts on the new trade agreement USMCA.
Key Highlights from the USMCA Fact Sheet
- Prohibit customs duties and other discriminatory measures from being applied to digital products distributed electronically (e-books, videos, music, software, games, etc.).
- Ensure that suppliers are not restricted in their use of electronic authentication or electronic signatures, thereby facilitating digital transactions.
- Limit governments’ ability to require disclosure of proprietary computer source code and algorithms, to better protect the competitiveness of digital suppliers.
- National treatment, to ensure that U.S. financial service suppliers receive the same treatment as local suppliers.
- Updated provisions would allow for the cross-border transfer of data and an updated market access obligation.
- To ensure that U.S. financial service suppliers receive the same treatment as those from other countries.
- Covers unfair currency practices by requiring high-standard commitments to refrain from competitive devaluations and targeting exchange rates, while significantly increasing transparency and providing mechanisms for accountability.
- One of President Trump’s principal objectives in the renegotiation is to ensure the agreement benefits American workers.
- Prohibits the importation of goods produced by forced labor, to address violence against workers exercising their labor rights, and to ensure migrant workers protected under labor laws.