The auto industry is looking south for new factories, and the farther south, the better.
Canada is struggling when it comes to retaining auto jobs, the U.S. is a house divided with most of the new automotive investment and jobs headed south of the Mason-Dixon line and Mexico is the auto industry darling.
The three countries are a united trading block under the North American Free Trade Agreement, or NAFTA, but they’re fierce rivals in the boardrooms where auto executives decide where to invest in the latest equipment and additional jobs.
Of the vehicles built in North America last year, Mexico produced about one in five, or double the rate from 2004. WardsAuto, which tracks production data, expects the rate to increase to one in four by 2020.
“The U.S.’ South and Mexico are winning the battle,” said Dennis DesRosiers, president of DesRosiers Automotive Consultants near Toronto. “Over half the capacity and 80% to 90% of investment dollars are going to the U.S. South or Mexico.”
Conversely, he sees the Canadian auto industry dwindling to five automakers with a single assembly plant each over the next decade or two — or about half its current manufacturing footprint.
The United Auto Workers union is keeping a close eye on the flood of automotive investment migrating to Mexico. The issue is especially critical for the UAW this year as it seeks product commitments from the Detroit Big 3 automakers in negotiating a new contract for about 140,000 U.S. autoworkers.
The auto industry is global, but increasingly companies want to build in the region where they sell. Which means chances are your new vehicle will continue to be built in North America but may not be made in the U.S.A.
Back in 2004, 11.6 million vehicles were built in the U.S., or 74% of the 15.8 million industry total. Canada built 2.7 million, or 17% of the capacity; and Mexico contributed only 1.4 million vehicles, or 9%, according to WardsAuto.
In 2014, signs were evident the tide had turned.
Mexico’s production had more than doubled to 3.2 million units, or 19% of the 16.9 million industry total. It came at the expense of the U.S., which dipped to 11.4 million units, or 67%; and Canada, which was down to 2.4 million, or 14%.
And the trend will continue. Wards forecasts new plants will add 1.2 million units of capacity in North America by 2020 and it is not evenly split.
Virtually every automaker is adding capacity in Mexico, including General Motors, Ford, Toyota, Honda, Volkswagen, Audi, BMW, Hyundai and Mazda.
The country is a “massive untapped market” that could grow by another 1 million to 2 million vehicles a year, DesRosiers said.
By 2020, Mexico is expected to build one in four vehicles in a North American industry of 18.6 million units. The U.S. will hold its own at two-thirds of the output, or 12.2 million vehicles. Canada is the big loser, down to 1.6 million vehicles and 9% of the output.
In 2014, automakers announced $18.25 billion in additional investments in North America. The breakdown: almost $10.5 billion for the U.S., $7 billion in new projects for Mexico, and a single $750-million project for Canada, according to the Center for Automotive Research in Ann Arbor.
That is on top of the 18 plants already in Mexico, and there are least five more planned or under construction. Mexico has seen a 40% increase in auto jobs since 2008 to 675,000 last year while the U.S. saw only a 15% increase in the same period to more than 900,000.
The supply base also has improved its quality, said Haig Stoddard, industry analyst for WardsAuto. “The litmus test was when Toyota said it would build there,” a reference to the company’s strict standards.
The domestic market continues to grow, and Mexico’s ports and its trade agreements with 45 counties have helped establish it as a strong export hub to Europe and South America as well as the rest of North America. By contrast, the U.S. has about 20 trade agreements, and Canada also has but a fraction of Mexico’s pacts.
“Mexico bested us on trade agreements,” said Sandra Pupatello, a former Canadian politician who now oversees business development for PwC Canada in Toronto as well as the Windsor-Essex Economic Development Corp. “They quietly have been negotiating trade agreements with the world.”
In the U.S., northern states are gaining third shifts at existing plants while the South is getting investment in new plants and the thousands of jobs that come with them.
By 2019, the U.S. South will have about 5 million units of capacity, almost catching up to the North, where the Midwest is not expected to grow much beyond the more than 6 million now, said Michael Robinet, managing director of IHS Automotive Consulting.
That is astounding given the history of how the auto industry developed.
The U.S. auto industry started in Detroit more than a century ago and the predominance of General Motors, Ford and Chrysler were such that they became known as the “Big Three.”
Production was centered in the Midwest and Michigan in particular — spilling over into neighboring Canada. It wasn’t until foreign automakers decided to build in the U.S. that a new manufacturing base was established in the South. States such as Alabama, Tennessee and Georgia used incentives and a nonunionized workforce to attract automakers seeking a manufacturing toehold in the U.S.
“The U.S. will be fine, at least over the next five years,” said Stoddard. “Production will stay here, especially of larger vehicles. There will be a lot of new capacity in the South, and it is needed. The North will hum along at current levels for the next five years.”
The fate of America’s most important free-trade agreement this century has become caught in a debate over its most important free-trade agreement of the last century. When opponents of the proposed Trans-Pacific Partnership say the deal would be “Nafta on steroids,” it’s fair to say: Yes, and isn’t that the point?
The North American Free Trade Agreement, which took effect in 1994, has helped to raise the living standards of Americans, Canadians and Mexicans. The TPP, which President Barack Obama hopes will serve as the capstone to his second term, can be expected to do the same for the 12 Pacific Rim nations it includes.
After some procedural shenanigans in the Senate — which nearly scuttled an important trade-promotion measure as well as the TPP talks — free-trade skeptics are back to citing Nafta’s supposed failings. Their indictment consists mainly of three charges: that the agreement resulted in bigger trade deficits, greater job losses and lower wages. None of these arguments stands up to scrutiny.
Nafta’s opponents are fond of pointing out that the U.S. now has a $44 billion trade deficit with Mexico, compared with a $5 billion pre-Nafta surplus. That $49 billion swing, however, is due less to Nafta than to the exponential growth in global trade in the 1990s and 2000s. The U.S. trade deficit with India, with which the U.S. has no trade treaty, also ballooned. Moreover, the trade data obscure the fact that goods imported from Mexico have about 40 percent U.S. content.
Nafta adversaries also say that, because of the deal, the U.S. has lost jobs. But the question of exactly how many jobs were lost is essentially unanswerable, even for economists. (Some 850,000 jobless workers have received what is known as “trade adjustment assistance” over the last two decades, but how many others got jobs because of increased exports to Mexico and Canada?) At any rate, it is a minuscule number in a U.S. workforce of 135 million people, 4 million to 6 million of whom lose or leave their jobs each month.
And what about that claim that Nafta suppressed wages? Yes,manufacturing wages have declined, but mainly because manufacturers are choosing automation over humans to make things and opting to move to lower-paying Southern states that eschew trade unions. Overall, in all three countries, real wages have risen since 1994.
What’s missing from the Nafta debate is that trade among the three countries has jumped 300 percent, to $1.2 trillion. Absent, too, is recognition that Nafta has helped to make U.S. companies more efficient, competitive and profitable. Less expensive imports have improved Americans’ purchasing power, resulting in higher living standards. And per-person gross domestic product is up in all three Nafta nations.
Opponents of such agreements like to point out that trade creates losers as well as winners. Of course it does — as does competition, as does technology. The goal should be to help the losers adjust, not prevent these deals altogether. Because for all the problems it creates — and they are real — commerce among nations is one of the greatest forces for peace and prosperity the world has ever known.
To contact the senior editor responsible for Bloomberg View’s editorials: David Shipley at email@example.com.
WASHINGTON — Even if the Teamsters fail to overturn a recent federal decision to allow Mexican motor carriers to haul loads past the border region, the impact of the new program may be negligible anyway.
The majority of U.S.-Mexico cross-border trade is shuttled over the border region, and interest from Mexican trucking companies in hauling goods farther inland and back to Mexico has received scant interest. To date, the Federal Motor Carrier Safety Administration has received just four applications from Mexican trucking firms after the agency announced in January that Mexican drivers could apply to move loads into the U.S. and back to their home country. The move brought the United States into compliance with the North American Free Trade Agreement that’s been in effect for two decades.
The four applications is a paltry sum compared to the number of qualified motor carriers in Mexico that could participate, given the program is open to all interested parties. It’s also considerably less than the 15 motor carriers that previously participated in a FMCSA three-year pilot — a pilot meant to test the stability of the very program now in dispute.
Nevertheless, the Teamsters Union has refused to back down. The International Brotherhood of Teamsters, alongside the Advocates for Highway and Auto Safety and the Truck Safety Coalition, filed a joint suit March 10 against the U.S. Department of Transportation, aiming to keep Mexican trucks out.
The groups contend in the suit that the data gleaned from the three-year FMCSA study used to support the new program “is arbitrary and capricious in light of the admitted lack of significant data.” The suit cites the DOT Inspector General Calvin Scovel’s own assessment of the three-year pilot study, in which he concluded the number of participating carriers was insufficient to “determine with confidence” the potential of a future cross-border program.
FMCSA decided to pursue the program in spite of the evidence on hand, said Teamsters General President Jim Hoffa.
“I am outraged that the Department of Transportation has chosen to ignore the findings of the DOT inspector general and is moving forward with a plan to open the border to Mexican trucks in the coming months,” Hoffa said in a statement shortly after the FMCSA announced the program was open to applicants in January.
Hoffa said the cross-border program not only ignores statutory and regulatory requirements, but also flies in the face of common sense.
“One thing was made clear in the IG’s report – the pilot program was a failure,” Hoffa said. “Allowing untested Mexican trucks to travel our highways is a mistake of the highest order and it’s the driving public that will be put at risk by the DOT’s rash decision.”
The dispute has put the teamsters at odds with the American Trucking Associations, the largest trade association for the U.S. trucking industry.
“We support opening the border,” ATA spokesman Sean McNally told JOC.com. “We support free trade and a seamless, safe, secure border for truck transport.”
McNally said the ATA has declined to “get into the weeds” on the number of current applications or participants in previous pilot studies. Instead, the ATA has emphasized the sheer economic value of the cross-border trucking program.
Not only will the program bring the U.S. into compliance with NAFTA provisions, but the policy change is expected to open trade between the two border countries and lead to the permanent termination of the more than $2 billion in annual retaliatory tariffs on U.S. goods.
“Trucks move more than 65 percent of all transnational trade between the U.S. and Mexico,” the ATA said in a statement. “In order to keep our economies efficient and growing, we continue to support our government’s efforts under NAFTA.”
The latest lawsuit is not the first nor the only dispute between the teamsters and the federal agency, McNally said, and U.S. operating authority for Mexican carriers has long been a controversial matter.
Since NAFTA went into effect in 1994, the U.S. has technically been required to allow cross-border trucking beyond established border areas. However, opposition from organized labor, led by the Teamsters, and safety advocacy groups, kept Mexican trucks from traveling beyond a narrow border commercial zone.
In 2007, the Bush administration opened a pilot project that admitted a limited number of Mexican trucking firms. There wasn’t a single crash involving any of the Mexican participants and violation rates for the Mexican trucks and drivers were less than those based in the U.S., according to online newsletter InsideFMCSA.com.
Two years later, Congress would later de-fund the Bush program at the behest of the Teamsters Union among others. The Mexican government protested and imposed a punitive tariff on all U.S. agricultural and manufactured exports — a tariff that was later sanctioned under a NAFTA arbitration which found the U.S. in violation of the treaty.
Now, InsideFMCSA.com suggests Congress could intervene once again.
Rep. Peter DeFazio, D-Oregon, ranking minority member on the House Transportation and Infrastructure Committee, has been an outspoken critic of the cross-border pilots and program. DeFazio has already said the program may be subject to congressional review as it prepares to renew federal highway funding which expires in May.
During a House committee hearing on transportation highway funding on Feb. 11, DeFazio said Mexico didn’t have much a truck regulatory agency. Mexico’s Federal Motor Transport agency would surely disagree.
You probably eat a lot more avocados than your parents did a few decades ago. Same goes for papayas and bell peppers. It might be because you have a refined palate or because you’ve gone and become a foodie, but really, you also have NAFTA to thank.
It’s easy to think of changing tastes as being just that — ephemeral shifts that just sort of happen. But trade policy has a hand in what’s popular, helping to drive food trends. A new report from the Department of Agriculture (first reported for NPR by author Tracie McMillan) sheds some light on just how much the American diet has changed since NAFTA.
A huge influx of Mexican produce
NAFTA, the trade agreement between the US, Canada, and Mexico implemented in 1994, loosened tariffs and rules on a variety of goods, allowing them to flow more freely across our northern and southern borders. And when that happened, it made some previously tough-to-find foods more available to American eaters year-round.
When it comes to US trade in produce with Canada and Mexico, the pipeline sending fruits and vegetables from Mexico to the US is by far the biggest. Both imports and exports between the US and its two NAFTA trading partners have grown, but US imports of fruits and vegetables from Mexico have soared since the early 1990s.
You can see a few areas where Mexican goods have slowly taken over the US market. Whereas in the early 1990s Mexico accounted for none of the avocados and just 11 percent of the bell peppers eaten in the US, these days it’s nearly half of both. For papayas, it used to be 27 percent. Now it’s 72 percent.
And Americans’ appetites for lots of these foods have only grown. We eat two kilograms of avocado per person per year now, three times what we did prior to NAFTA. We eat twice as many strawberries per person, packing away 3.4 kilos per person each year, and three times as many limes as we did prior to NAFTA. The below chart summarizes a few of the fruits and vegetables that have grown more popular since NAFTA…and whose imports from Mexico and Canada have substantially grown since NAFTA.
Canada accounts for a much smaller share of US imports on many fruits and vegetables than Mexico, but after NAFTA, the US started bringing in a lot more of some Canadian vegetables. Today, the US is a net importer of cucumbers and mushrooms from up north, whereas prior to NAFTA it had been a net exporter.
New technology and new rules came into play as well. More and better greenhouses, for example, allowed Canada to grow more vegetables, the USDA says. Avocados are another example. Until 1993, the US didn’t allow avocado imports from Mexico for fear that the fruits would bring with them the avocado seed weevil. But NAFTA started the process of relaxing that rule.
Fruit from Mexico, corn (and corn syrup) from the US
While NAFTA helped change the US diet, it also sent US foods north and south of the border. One huge area was corn. US exports of corn to Mexico, for example, more than quadrupled between the early 1990s and 2012.
Not that all this new, freer trade made everyone happy. Trade agreements are about trade-offs — the Mexican avocado industry exploded after NAFTA. But many of its corn farmers suffered, as US corn flowed into Mexico. Likewise, sugar trade provisions made both as part of NAFTA and since then have created an ongoing battle between Mexican and US sugar farmers. A country may make overall gains from trade, but it won’t make everyone in that country happy.
And NAFTA’s effects on food supplies are about more than new, exciting foods and higher profits (or losses) for farmers. NAFTA may have helped Americans to eat more fresh fruits and vegetables, but it also may be making Mexicans’ food choices less healthy, as McMillan points out. Along with corn, the US has ratcheted up its exports of high-fructose corn syrup and other processed foods, for example, to Mexico. One 2012 study linked NAFTA to Mexico’s ongoing obesity epidemic.
It’s also true that Americans may have started liking bell peppers or berries a lot more (or that Mexicans may have started eating more corn), even without NAFTA’s help. The USDA report itself attributes the changing US consumption of many of products to “changing diets.” But it also says that the ability to get so many more fruits and vegetables in the off-season helped get Americans to eat more fresh produce. What NAFTA helped do was make many types of food more widely available to a lot more people.
Last year’s peak season in Mexico brought about the worst capacity shortage we’ve experienced in a decade. The imbalance in trade between the U.S. and Mexico left shippers scrambling to find truck and rail capacity as carriers were forced to reposition empty equipment in order to meet the demand.
While shippers were hoping for relief during the offseason, that was not the case. Already in 2015, the normal pools for equipment that accrue in Mexico during the off season have yet to appear, so capacity remains tight. This has not only made for a challenging off season, but is also an indicator of things to come.
The imbalance in northbound and southbound trade has continued to increase in recent years as Mexico has become a preferred country for manufacturing and more and more companies have near-sourced operations from Asia to Mexico. Additionally, more Asian goods are now being shipped into Mexico directly via ocean, which has further disrupted the balance of inbound/outbound capacity.
With the growing number of exports from Mexico to the U.S., the trade imbalance will not go away, and capacity will continue to be in high demand. The capacity shortage is further exacerbated by the U.S. driver shortage, which adds even greater limitations for carriers in being able to move available equipment and insert additional capacity into the market.
This capacity shortage will be further intensified once produce peak season begins in April. The increase in produce shipments will command available capacity and create challenges for shippers, even for those companies moving dry goods, as much of the equipment will be refocused on perishable and time-sensitive agricultural products. This combined with the seasonal slowdown in southbound movements into Mexico will create serious capacity issues.
With capacity in high demand, U.S. carriers will focus a majority of their truck volume and drivers toward fulfilling their U.S. commitments before sending excess capacity to the border. So as the demand of exports in Mexico continue to increase, there will be fewer available trucks and railcars moving southbound to meet that demand.
This year’s peak season capacity shortage is projected to be worse than pre-recession time periods. In key markets such as Monterrey, Guadalajara and the Bajío Region, there will be only one trailer moving south for every 3-4 required northbound. Some shippers think giving carriers an extra two to three days’ notice on their transportation equipment needs will solve the problem, but that’s not the case. While giving advanced notice will help, it does not solve the issue of a lack of capacity for all shippers in the Mexican market.
During last year’s peak season, a number of shippers addressed capacity challenges by transloading goods to the U.S.-Mexico border. Many companies will look to use this strategy again this year, but moving freight to the border on a transload should not be viewed as a fix-all solution. While it does give shippers access to more U.S. carriers that don’t currently enter Mexico, which could lead to a shorter wait time for freight pickup from their plant, it doesn’t eliminate the potential wait time at the border.
Due to the number of touch points throughout the cross-border shipping process, there are a lot of things that can go wrong in a tight capacity market. So even if shippers can get their freight to the border, they still may be forced to wait for a U.S. tractor to be available to go northbound. Shippers need to understand that even with implementing new strategies to adapt to shortage of capacity, service levels will continue to be affected – both in the pickup of freight and due to corresponding issues at the border.
To meet the increased demand, many carriers are sending partially filled or empty trucks to southern border lanes in order pick up freight — forcing them to operate at a loss as they reposition available equipment. Further straining the already volatile market is the expectation from many shippers that the transportation carrier, brokers and logistics companies will absorb these additional costs. While that may have been done in the past, shippers cannot expect them to take on the cost of peak season, especially in today’s carrier-friendly market where companies are knocking at the carrier’s door in order to get capacity.
One way to compensate for the imbalance of trade during these high demand months is through a peak season surcharge (PSS), similar to those implemented by ocean and air carriers. This pricing strategy enables carriers to operate as the market demands, without the risk of incurring significant loses. By paying a PSS, shippers would enable their carrier partners to relocate some empty equipment in order to meet demand. While this won’t create a guaranteed capacity solution, it can help make hard to come by capacity more readily available.
Shippers partnering with a third-party logistics (3PL) provider can take a more collaborative approach to implementing a PSS strategy. A 3PL can help pool together companies willing to pay a PSS in order to command greater freight spend in order to secure more capacity, then diversify the empty miles and repositioning of equipment among those participating companies. This would allow them to enter the spot market and pay premiums on an as-needed basis and not as their only option besides waiting.
As the growing number of exports from Mexico to the U.S. show no signs of slowing down, the challenges that come as a result of the trade imbalance will not go away. Shippers need to understand that many of the old practices during the recession won’t apply this year or in coming years. Simply transloading shipments to the border or diversifying their transportation modes won’t solve the problem the way it has in the past. Shippers need to explore new strategies and work with their carrier partners to create a mutually-beneficial shipper-carrier approach to peak season.
I ran into this very interesting article regarding border security and the measures that are being taken to further secure our borders and facilitate trade. This article is from GLOBAL RESEARCH, CENTRE FOR RESEARCH ON GLOBALIZATION. www.globalresearch.ca , www.globalresearch.org
It was October 2012. Roei Elkabetz, a brigadier general for the Israel Defense Forces (IDF), was explaining his country’s border policing strategies. In his PowerPoint presentation, a photo of the enclosure wall that isolates the Gaza Strip from Israel clicked onscreen. “We have learned lots from Gaza,” he told the audience. “It’s a great laboratory.”
Elkabetz was speaking at a border technology conference and fair surrounded by a dazzling display of technology — the components of his boundary-building lab. There were surveillance balloons with high-powered cameras floating over a desert-camouflaged armored vehicle made by Lockheed Martin. There were seismic sensor systems used to detect the movement of people and other wonders of the modern border-policing world. Around Elkabetz, you could see vivid examples of where the future of such policing was heading, as imagined not by a dystopian science fiction writer but by some of the top corporate techno-innovators on the planet.
Swimming in a sea of border security, the brigadier general was, however, not surrounded by the Mediterranean but by a parched West Texas landscape. He was in El Paso, a 10-minute walk from the wall that separates the United States from Mexico.
Just a few more minutes on foot and Elkabetz could have watched green-striped U.S. Border Patrol vehicles inching along the trickling Rio Grande in front of Ciudad Juarez, one of Mexico’s largest cities filled with U.S. factories and the dead of that country’s drug wars. The Border Patrol agents whom the general might have spotted were then being up-armored with a lethal combination of surveillance technologies, military hardware, assault rifles, helicopters, and drones. This once-peaceful place was being transformed into what Timothy Dunn, in his book The Militarization of the U.S. Mexico Border, terms a state of “low-intensity warfare.”
The Border Surge
On November 20, 2014, President Obama announced a series of executive actions on immigration reform. Addressing the American people, he referred to bipartisan immigration legislation passed by the Senate in June 2013 that would, among other things, further up-armor the same landscape in what’s been termed — in language adopted from recent U.S. war zones — a “border surge.” The president bemoaned the fact that the bill had been stalled in the House of Representatives, hailing it as a “compromise” that “reflected common sense.” It would, he pointed out, “have doubled the number of Border Patrol agents, while giving undocumented immigrants a pathway to citizenship.”
In the wake of his announcement, including executive actions that would protect five to six million of those immigrants from future deportation, the national debate was quickly framed as a conflict between Republicans and Democrats. Missed in this partisan war of words was one thing: the initial executive action that Obama announced involved a further militarization of the border supported by both parties.
“First,” the president said, “we’ll build on our progress at the border with additional resources for our law enforcement personnel so that they can stem the flow of illegal crossings and speed the return of those who do cross over.” Without further elaboration, he then moved on to other matters.
If, however, the United States follows the “common sense” of the border-surge bill, the result could add more than $40 billion dollars worth of agents, advanced technologies, walls, and other barriers to an already unparalleled border enforcement apparatus. And a crucial signal would be sent to the private sector that, as the trade magazine Homeland Security Today puts it, another “treasure trove” of profit is on the way for a border control market already, according to the latest forecasts, in an “unprecedented boom period.”
Like the Gaza Strip for the Israelis, the U.S. borderlands, dubbed a “constitution-free zone” by the ACLU, are becoming a vast open-air laboratory for tech companies. There, almost any form of surveillance and “security” can be developed, tested, and showcased, as if in a militarized shopping mall, for other nations across the planet to consider. In this fashion, border security is becoming a global industry and few corporate complexes can be more pleased by this than the one that has developed in Elkabetz’s Israel.
“The Palestine-Mexico Border”
Consider the IDF brigadier general’s presence in El Paso two years ago an omen. After all, in February 2014, Customs and Border Protection (CBP), the Department of Homeland Security (DHS) agency in charge of policing our borders, contracted with Israel’s giant private military manufacturer Elbit Systems to build a “virtual wall,” a technological barrier set back from the actual international divide in the Arizona desert. That company, whose U.S.-traded stock shot up by 6% during Israel’s massive military operation against Gaza in the summer of 2014, will bring the same databank of technology used in Israel’s borderlands — Gaza and the West Bank — to Southern Arizona through its subsidiary Elbit Systems of America.
With approximately 12,000 employees and, as it boasts, “10+ years securingthe world’s most challenging borders,” Elbit produces an arsenal of “homeland security systems.” These include surveillance land vehicles, mini-unmanned aerial systems, and “smart fences,” highly fortified steel barriers that have the ability to sense a person’s touch or movement. In its role as lead system integrator for Israel’s border technology plan, the company has already installed smart fences in the West Bank and the Golan Heights.
In Arizona, with up to a billion dollars potentially at its disposal, CBP has tasked Elbit with creating a “wall” of “integrated fixed towers” containing the latest in cameras, radar, motion sensors, and control rooms. Construction will start in the rugged, desert canyons around Nogales. Once a DHS evaluation deems that part of the project effective, the rest will be built to monitor the full length of the state’s borderlands with Mexico. Keep in mind, however, that these towers are only one part of a broader operation, the Arizona Border Surveillance Technology Plan. At this stage, it’s essentially a blueprint for an unprecedented infrastructure of high-tech border fortifications that has attracted the attention of many companies.
This is not the first time Israeli companies have been involved in a U.S. border build-up. In fact, in 2004, Elbit’s Hermes drones were the first unmanned aerial vehicles to take to the skies topatrol the southern border. In 2007, according to Naomi Klein in The Shock Doctrine, the Golan Group, an Israeli consulting company made up of former IDF Special Forces officers,provided an intensive eight-day course for special DHS immigration agents covering “everything from hand-to-hand combat to target practice to ‘getting proactive with their SUV.’” The Israeli company NICE Systems evensupplied Arizona’s Joe Arpaio,“America’s toughest sheriff,” with a surveillance system to watch one of his jails.
As such border cooperation intensified, journalist Jimmy Johnson coined the apt phrase “Palestine-Mexico border” to catch what was happening. In 2012, Arizona state legislators, sensing the potential economic benefit of this growing collaboration, declared their desert state and Israel to be natural “trade partners,” adding that it was “a relationship we seek to enhance.”
In this way, the doors were opened to a new world order in which the United States and Israel are to become partners in the “laboratory” that is the U.S.-Mexican borderlands. Its testing grounds are to be in Arizona. There, largely through a program known as Global Advantage, American academic and corporate knowhow and Mexican low-wage manufacturing are to fuse with Israel’s border and homeland security companies.
The Border: Open for Business
No one may frame the budding romance between Israel’s high-tech companies and Arizona better than Tucson Mayor Jonathan Rothschild. “If you go to Israel and you come to Southern Arizona and close your eyes and spin yourself a few times,” he says, “you might not be able to tell the difference.”
Global Advantage is a business project based on a partnership between the University of Arizona’s Tech Parks Arizona and the Offshore Group, a business advisory and housing firm which offers “nearshore solutions for manufacturers of any size” just across the border in Mexico. Tech Parks Arizona has the lawyers, accountants, and scholars, as well as the technical knowhow, to help any foreign company land softly and set up shop in the state. It will aid that company in addressing legal issues, achieving regulatory compliance, and even finding qualified employees — and through a program it’s called the Israel Business Initiative, Global Advantage has identified its target country.
Think of it as the perfect example of a post-NAFTA world in which companies dedicated to stopping border crossers are ever freer to cross the same borders themselves. In the spirit of free trade that created the NAFTA treaty, the latest border fortification programs are designed to eliminate borders when it comes to letting high-tech companies from across the seas set up in the United States and make use of Mexico’s manufacturing base to create their products. While Israel and Arizona may be separated by thousands of miles, Rothschild assured TomDispatch that in “economics, there are no borders.”
Of course, what the mayor appreciates, above all, is the way new border technology could bring money and jobs into an area with a nearly 23% poverty rate. How those jobs might be created matters far less to him. According to Molly Gilbert, the director of community engagement for the Tech Parks Arizona, “It’s really about development, and we want to create technology jobs in our borderlands.”
So consider it anything but an irony that, in this developing global set of boundary-busting partnerships, the factories that will produce the border fortresses designed by Elbit and other Israeli and U.S. high-tech firms will mainly be located in Mexico. Ill-paid Mexican blue-collar workers will, then, manufacture the very components of a future surveillance regime, which may well help locate, detain, arrest, incarcerate, and expel some of them if they try to cross into the United States.
Think of Global Advantage as a multinational assembly line, a place where homeland security meets NAFTA. Right now there are reportedly 10 to 20 Israeli companies in active discussion about joining the program. Bruce Wright, the CEO of Tech Parks Arizona, tells TomDispatch that his organization has a “nondisclosure” agreement with any companies that sign on and so cannot reveal their names.
Though cautious about officially claiming success for Global Advantage’s Israel Business Initiative, Wright brims with optimism about his organization’s cross-national planning. As he talks in a conference room located on the 1,345-acre park on the southern outskirts of Tucson, it’s apparent that he’s buoyed by predictions that the Homeland Security market will grow from a $51 billion annual business in 2012 to $81 billion in the United States alone by 2020, and $544 billion worldwide by 2018.
Wright knows as well that submarkets for border-related products like video surveillance, non-lethal weaponry, and people-screening technologies are all advancing rapidly and that the U.S. market for drones is poised to create 70,000 new jobs by 2016. Partially fueling this growth is what the Associated Press calls an “unheralded shift” to drone surveillance on the U.S. southern divide. More than 10,000 drone flights have been launched into border air space since March 2013, with plans for many more, especially after the Border Patrol doubles its fleet.
When Wright speaks, it’s clear he knows that his park sits atop a twenty-first-century gold mine. As he sees it, Southern Arizona, aided by his tech park, will become the perfect laboratory for the first cluster of border security companies in North America. He’s not only thinking about the 57 southern Arizona companies already identified as working in border security and management, but similar companies nationwide and across the globe, especially in Israel.
In fact, Wright’s aim is to follow Israel’s lead, as it is now the number-one place for such groupings. In his case, the Mexican border would simply replace that country’s highly marketed Palestinian testing grounds. The 18,000 linear feet that surround the tech park’s solar panel farm would, for example, be a perfect spot to test out motion sensors. Companies could also deploy, evaluate, and test their products “in the field,” as he likes to say — that is, where real people are crossing real borders — just as Elbit Systems did before CBP gave it the contract.
“If we’re going to be in bed with the border on a day-to-day basis, with all of its problems and issues, and there’s a solution to it,” Wright said in a 2012 interview, “why shouldn’t we be the place where the issue is solved and we get the commercial benefit from it?”
From the Battlefield to the Border
When Naomi Weiner, project coordinator for the Israel Business Initiative, returned from a trip to that country with University of Arizona researchers in tow, she couldn’t have been more enthusiastic about the possibilities for collaboration. She arrived back in November, just a day before Obama announced his new executive actions — a promising declaration for those, like her, in the business of bolstering border defenses.
“We’ve chosen areas where Israel is very strong and Southern Arizona is very strong,” Weiner explained to TomDispatch, pointing to the surveillance industry “synergy” between the two places. For example, one firm her team met with in Israel was Brightway Vision, a subsidiary of Elbit Systems. If it decides to set up shop in Arizona, it could use tech park expertise to further develop and refine its thermal imaging cameras and goggles, while exploring ways to repurpose those military products for border surveillance applications. The Offshore Group would then manufacture the cameras and goggles in Mexico.
Arizona, as Weiner puts it, possesses the “complete package” for such Israeli companies. “We’re sitting right on the border, close to Fort Huachuca,” a nearby military base where, among other things, technicians control the drones surveilling the borderlands. “We have the relationship with Customs and Border Protection, so there’s a lot going on here. And we’re also the Center of Excellence on Homeland Security.”
Weiner is referring to the fact that, in 2008, DHS designated the University of Arizona the lead school for the Center of Excellence on Border Security and Immigration. Thanks to that, it has since received millions of dollars in federal grants. Focusing on research and development of border-policing technologies, the center is a place where, among other things, engineers are studying locust wings in order to create miniature drones equipped with cameras that can get into the tiniest of spaces near ground level, while large drones like the Predator B continue to buzz over the borderlands at 30,000 feet (despite the fact that a recent audit by the inspector general of homeland security found them a waste of money).
Although the Arizona-Israeli romance is still in the courtship stage, excitement about its possibilities is growing. Officials from Tech Parks Arizona see Global Advantage as the perfect way to strengthen the U.S.-Israel “special relationship.” There is no other place in the world with a higher concentration of homeland security tech companies than Israel. Six hundred tech start-ups are launched in Tel Aviv alone every year. During the Gaza offensive last summer, Bloombergreported that investment in such companies had “actually accelerated.” However, despite the periodic military operations in Gaza and the incessant build-up of the Israeli homeland security regime, there are serious limitations to the local market.
The Israeli Ministry of Economy is painfully aware of this. Its officials know that the growth of the Israeli economy is “largely fueled by a steady increase in exports and foreign investment.” The government coddles, cultivates, and supports these start-up tech companies until their products are market-ready. Among them have been innovations like the “skunk,” a liquid with a putrid odor meant to stop unruly crowds in their tracks. The ministry has also been successful in taking such products to market across the globe. In the decade following 9/11, sales of Israeli “security exports” rose from $2 billion to $7 billion annually.
Israeli companies have sold surveillance drones to Latin American countries like Mexico, Chile, and Colombia, and massive security systems to India and Brazil, where an electro-optic surveillance system will be deployed along the country’s borders with Paraguay and Bolivia. They have also been involved in preparations for policing the 2016 Olympics in Brazil. The products of Elbit Systems and its subsidiaries are now in use from the Americas and Europe to Australia. Meanwhile, that mammoth security firm is ever more involved in finding “civilian applications” for its war technologies. It is also ever more dedicated to bringing the battlefield to the world’s borderlands, including southern Arizona.
As geographer Joseph Nevins notes, although there are many differences between the political situations of the U.S. and Israel, both Israel-Palestine and Arizona share a focus on keeping out “those deemed permanent outsiders,” whether Palestinians, undocumented Latin Americans, or indigenous people.
Mohyeddin Abdulaziz has seen this “special relationship” from both sides, as a Palestinian refugee whose home and village Israeli military forces destroyed in 1967 and as a long-time resident of the U.S.-Mexico borderlands. A founding member of the Southern Arizona BDS Network, whose goal is to pressure U.S. divestment from Israeli companies, Abdulaziz opposes any program like Global Advantage that will contribute to the further militarization of the border, especially when it also sanitizes Israel’s “violations of human rights and international law.”
Such violations matter little, of course, when there is money to be made, as Brigadier General Elkabetz indicated at that 2012 border technology conference. Given the direction that both the U.S. and Israel are taking when it comes to their borderlands, the deals being brokered at the University of Arizona look increasingly like matches made in heaven (or perhaps hell). As a result, there is truth packed into journalist Dan Cohen’s comment that “Arizona is the Israel of the United States.”
It’s important for people to live up to the promises they make. It’s important for countries to live up to the promises they make, too. The Obama administration has announced that the United States will finally begin living up to a big promise it made to Mexico 21 years ago. Both nations will be better for it.
The North American Free Trade Agreement, ratified in 1994 by the United States, Canada and Mexico, is the largest trade bloc in the world in terms of the combined purchasing power of the three nations. But one of its provisions called for the U.S. to open its border to long-haul truckers from Mexico and, for 21 years, largely because of the political muscle of the Teamsters union, that provision has never been allowed to take effect.
Now it will. The U-T San Diego reported that the administration will soon invite Mexican trucking companies to apply for permits to make deliveries directly to U.S. destinations. The announcement follows a three-year pilot program that showed that Mexican carriers are every bit as safe as their American and Canadian counterparts.
In its 21 years, NAFTA has quadrupled U.S. trade in goods and services with Canada and Mexico. Finally complying with the trucking provision with Mexico will only increase that positive impact.
FROM: NATIONAL CUSTOM BROKER AND FREIGHT FORWARDERS ASSOCIATION OF AMERICA
Washington, DC: Earlier today, CBP Commissioner R. Gil Kerlikowske and Deputy Commissioner Kevin K. McAleenan confirmed the promotions of Todd C. Owen to Assistant Commissioner and John Wagner to Deputy Assistant Commissioner of Office of Field Operations in an announcement at headquarters.
The Office of Field Operations (OFO), is the largest component in CBP and is responsible for border security—including antiterrorism, immigration, anti-smuggling, trade compliance, and agriculture protection—while simultaneously facilitating the lawful trade and travel at U.S. ports of entry that is critical to our Nation’s economy.
In his new post Assistant Commissioner Owen is responsible for overseeing the operations of 20 major field offices, 328 ports of entry, and 70 locations in over 40 countries internationally, with a staff of more than 28,000 employees, and an operating budget of $3.2 billion.
NCBFAA President Geoffrey Powell advised Commissioner Kerlikowske and Deputy Commissioner McAleenan that the NCBFAA is very excited with these appointments as both individuals bring vast experience in their prior positions for both enforcement and trade facilitation.
“We have had the opportunity to get to know Mr. Wagner in his acting role of Assistant Commissioner and have worked closely with Mr. Owen in his prior roles as a Program Director, Port Director, Executive Director of Cargo Conveyance and Security, and most recently as DFO in California,” he said. “The NCBFAA looks forward very much to working closely with these key leaders in the future and congratulate both on their new positions.”
Mexico’s German auto history began with small, cheap cars. Now it’s becoming a place where top-of-the-line German brands roll out of billion-dollar factories.
By decade’s end, Mexico will claim fourth place worldwide for German luxury output after the carmakers’ home country, China and the U.S., according to estimates compiled for Bloomberg by IHS Automotive consultant Guido Vildozo, surpassing Belgium, Spain and Brazil.
In choosing Mexico for a plant site this year, BMW validated the nation’s emergence as an auto-assembly powerhouse from its roots making Volkswagen’s iconic Beetle. BMW, the biggest premium-vehicle producer, completes the trio of German marques, after Audi and Mercedes-Benz, in deciding since 2012 to build cars in Mexico.
“Mexico has become the crossroads of automotive trade for the western hemisphere,” IHS Automotive Managing Director Michael Robinet said in a telephone interview. “Mexico has proven it can build a vehicle of any stripe.”
The luxury automakers jumped ahead of some competitors that are still refining strategies for Mexico, which is poised to become Latin America’s largest vehicle producer. South Korea’s Kia Motors announced a more than US$1-billion project in August, while Toyota, the last major automaker without a high-volume Mexico assembly plant, is still studying expansion plans.
The country has gotten negative attention recently as the source of some of Takata Corp.’s defective air bags, blamed for at least five deaths. While it was once seen as a dangerous place, where executives feared for their safety, it’s now winning the trust and investment of the highly regarded manufacturers.
Mexican factory quality, a surge in engineers and an expanding domestic parts industry all helped pave the way for BMW, Mercedes-Benz and Audi, said Armando Soto, president of Kaso & Asociados, a Mexico City-based autoindustry consultant.
“This was quite an easy decision,” Bernhard Eich, the BMW director for the new San Luis Potosi plant, said in a telephone interview. “We are very confident we will find the skilled workforce. We have a huge supply network in Mexico.”
While the choices of plant locations were long in the making, in recent weeks Mexico has faced mounting domestic unrest over the disappearance of 43 college students. Nationwide protests, including one of throngs of tens of thousands last week, may impact the outside perception of the country as a place to do business if they continue.
BMW is set to start production in 2019, and will be the last of the three luxury automakers, sometimes called original equipment manufacturers, to go online. Ingolstadt, Germany-based Audi, the first of the group to announce a Mexico plant, will begin assembly in 2016. Stuttgart, Germany-based Daimler, along with Nissan, will make Mercedes-Benz and Infiniti compact cars at its factory opening in 2017.
Volkswagen ushered in the German auto-production era in Mexico by building Beetles from 1967 to 2003 in Puebla state. The cars were once the vehicle of choice for Mexico City taxi companies, with thousands in green-and-white livery plying the capital’s crowded streets.
The Beetle production legacy was a draw for Audi, according to Javier Valadez, a spokesman for the carmaker, a Volkswagen unit.
“Mexico is the ideal country for Audi,” Valadez said. That’s because of “the level of development of Mexican providers as well as its distinct knowledge of German engineering thanks to the relationship between Mexican companies and Volkswagen for more than 50 years.”
The Volkswagen brand also may join the high-end auto push. Excelsior newspaper reported without attribution Sept. 8 that Volkswagen was considering making Touareg and Tiguan sport-utility vehicles by building a third plant in Puebla state. Israel Victoria Diaz, a spokesman at the company’s Mexico unit, told Bloomberg News via e-mail that the automaker doesn’t have any concrete plans concerning new projects in Puebla.
“It’s a snowball effect,” Bill Rinna, senior manager of North American forecasts at LMC Automotive, said in a telephone interview from Troy, Michigan. “As more automotive suppliers move there and more of these OEMs add capacity in the country, it attracts other manufacturers to the region. Cost definitely has to do with it, but there’s also a highly skilled workforce there.”
Graduates from technical schools and engineering programs increased to about 25 per cent of degree-holders in Mexico in 2011 from about 15 percent in 2007, compared with a stagnant rate of close to 10 percent in the U.S., according to ProMexico, the nation’s export promotion agency.
Soto of Kaso & Asociados said parts priced about 10 percent cheaper than in the U.S. let German luxury brands hit by Europe’s recession cut costs without sacrificing the quality their clients demand.
Improvements in automation at Mexican plants have helped the country lure the industry’s leaders, said Michelle Hill, a consultant in Troy, Michigan, at Oliver Wyman. The nation’s labour productivity is improving faster than in the U.S., Hill said, citing editions from previous years of her firm’s Harbour Report.
In addition to the German brands that dominate global premium sales, Ford makes the Lincoln MKZ in Hermosillo, and General Motors builds the Cadillac SRX in Ramos Arizpe, though that work will move to Tennessee at the end of next year.
The output bump from premium automakers flocking to Mexico will allow the nation to push aside South Korea to become the third-largest car exporter after Japan and Germany by 2016, according to IHS’s Robinet.
Both Audi’s Valadez and BMW’s Eich said they may expand beyond the 150,000 units they’re each scheduled to produce per year. The Nissan-Mercedes venture may produce 300,000 vehicles annually.
“There will be a huge increase of capacity in the luxury market,” Eich said. “We approached Mexico because we knew about the advantages.”
U.S.-Mexico cross-border trucking and rail volume is poised to increase after Mexican factory export production in October hit a five-year high.
Mexican factory exports rose nearly 5.4 percent in October from September in seasonally adjusted terms, Mexico’s statistics agency today reported, according to Reuters. The growth, which reversed a contraction of production in September, also suggest that the second-largest Latin American economy is taking off after a lackluster year. Roughly 80 percent of Mexican exports head to the U.S., although the country is become a larger exporter to fellow Latin American countries, thanks partly to more than 40 free trade agreements and competitive costs for skilled labor.
Mexican auto production drove total export production, with shipments rising 8.5 percent in October from September.
Auto manufacturers and their parts suppliers have been shifting production to Mexico over the last decade as Asian labor costs rise and manufacturers seek lower transportation costs and better control of supply chains.
U.S.-Mexico trade has helped fuel total trade among North American Free Trade Agreement countries to heights few proponents would have imagined two decades ago when the pact was forged. The value of U.S. trade with Mexico and Canada increased by $7.8 billion in September, exceeding $100 billion for the seventh straight month, according to the Department of Transportation’s Bureau of Transportation Statistics.
The value of freight trucked between Mexico and the U.S. in the first nine months of the year rose 13.5 percent year-over-year, while rail trade by value between the two countries slipped 3.3 percent in the same period. Trucks hauled about 67 percent of the total $45 billion in freight shipped between Mexico and the U.S. in September, with rail transport accounting for 13.5 percent of the total share.