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Arizona manufacturer sees Mexico as key to growth

Marketplace Contributor Oct 29, 2012

Arizona manufacturer sees Mexico as key to growth

Marketplace Contributor Oct 29, 2012

Like most Americans, Bill Jordan drives to work. But unlike most, his commute involves an international border crossing.

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. 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.

It’s part of a trend of growing economic integration between the United States and Mexico.

Jordan is just one guy in a long line of U.S. manufacturers who have made this trek south. Since NAFTA took effect, big, multinational companies like Ford and General Electric have expanded their operations in Mexico – sometimes taking American jobs with them. Jordan’s company followed their biggest customer Honeywell, and began making airplane engine parts here.

“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 with just three Mexican employees and a few big, machines. This is new business, so none of the company’s 100 employees in Phoenix lost their jobs.

In fact, as the company expanded south, it also upgraded machinery in Phoenix so workers at that plant could make more sophisticated parts.

Meanwhile, workers at the Mexicali plant earn about a third of what their American counterparts make. 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, they will travel north to Arizona for processing and then cross back to Mexicali to be installed into a Honeywell airplane engine system. Since all the parts are made from North American materials, that means no tariffs when they cross the border.

Michael Camuñez, an assistant secretary at the U.S. Department of Commerce, says NAFTA has helped grow these highly integrated supply chains that support jobs in both countries.

“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.”

Chris Wilson of the Woodrow Wilson Center’s Mexico Institute says a fundamental shift has taken place.

“People used to be worried about jobs being sent to Mexico from a U.S. perspective, but that has really changed, now people are worried about jobs being sent to China,” Wilson said.

Over the last decade or so, low wages in Asia drew thousands of manufacturers away from North America. But now some new manufacturing plants are opening up again in Mexico.

The number of aerospace companies in the country has quadrupled in the past seven years, and automotive manufacturing is also on the rise. Some analysts say that growth could have benefits for the entire continent, since it could generate opportunities for nearby American and Canadian suppliers.

“The reality is that we in North America 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.”

‘Partners in the global economy’ sounds about right to Bill Jordan of Allied Tool & Die. Back in Mexicali, he says Mexico’s progress in aerospace is what will keep the company’s Phoenix plant growing.

“That is one of the reasons why we are here and we are trying, is so that that 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 to keep it here on our continent, within the NAFTA.”

That’s the hopeful manufacturing mantra you hear these days all along the border: Mexico’s growth should be good for the U.S. So for now, Jordan has room to expand his business here in Mexico, and he’s looking for more aerospace clients.

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