Mexico moves up Value Chain

As China takes up the manufacturing jobs, WSJ writes how Mexico is fighting back:

Factories in Mexico long were winners in the flow of labor around the world, as many U.S. companies relocated there to take advantage of lower wage costs. Now rivals in China can match the quality and productivity of Mexican factories, but at far-lower cost.

So Mr. Sanchez and other managers are moving their factories up the manufacturing food chain, retooling to make more advanced products. Now they are competing against factories in developed economies such as the U.S. that earlier thought they were safe from foreign competition. Mr. Sanchez attracted many of his new orders from another Jabil facility in Boise, Idaho — prompting Jabil to close the plant in September 2002 and lay off its 500 employees. The factory was only two years old.

“China makes you sharp or it kills you,” says Eslie Sykes, manager of a Flextronics Inc. plant a few miles away from Jabil’s facility in this city best known for its fiery tequila and Mariachi musicians. After a lull in activity for the past two years, Mr. Sykes’s one-million-square-foot plant is now poaching higher-end work from Ireland and France. One of his factory’s newer products, a data storage system for a U.S. based electronics company, uses 91 customized screws.

What’s happening in Mexico illustrates how globalization is a double threat to blue-collar workers in wealthy countries such as the U.S as low-skill factory jobs migrate directly to China and countries such as Mexico accelerate their competitiveness for their own survival. By playing the role of upstart global entrepreneur, China isn’t just drawing in jobs but forcing factories throughout the rest of the world to become more efficient. “It’s Economics 101 in action,” says Claudio Bertoluz, head of Mexico’s electronics manufacturing association.

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Rajesh Jain

An Entrepreneur based in Mumbai, India.