Thank you, Madam Chairwoman, Mr. Chairman, members of the Committee. My name is Jon Barela. I am the CEO of the Borderplex Alliance.
The Borderplex Alliance to my knowledge is the only privately funded which does economic development work and policy advocacy work in three states and two countries. The Borderplex region, we define and our organization represents El Paso County, Ciudad Juárez and my home county of Doña Ana County, New Mexico, in these endeavors.
So, it is a pleasure to be with you here this morning.
I wanted to share with you what I think is next. What comes next for the State of Texas and certainly our region. Let me first start with a headline and that is we are moving towards what I call globalization of the world economy to hemispheric globalization.
In other words supply chains are being consolidated. There is no doubt about that. You have heard prior speakers address it. I would like to go into a little more detail about what we are seeing and about what companies are telling us in terms of near-shoring and re-shoring efforts. And how that is going to impact positively, I believe, the economy of the state of Texas and ultimately the economy of the USMCA nations.
Let me also add that our region recently moved into fifth place. We are now the fifth largest manufacturing hub in North America. Our region consists of 2.7 million individuals. And we recently surpassed Detroit-Windsor for that honor. So, we are becoming a manufacturing powerhouse in our region. Three hundred thousand individuals directly are involved in manufacturing now, in our area.
Re-shoring, near-shoring, provides an amazing, an incredible, maybe once in a generation opportunity for states and for localities that understand what is coming and what is coming next. We at the Borderplex Alliance, five years ago, when I started this job saw virtually no opportunities from re-shoring, primarily from Asia, to our region. Today we are at record levels for project leads from all over the world but 35 percent of the project leads that we are currently trying to land in our region are re-shoring opportunities from China. That is a dramatic increase in activity from five years ago.
I would estimate, conservatively, that we are looking at, potentially, in the next 24 to 36 months, maybe four years down the road, a potential re-shoring of at least 100,000 jobs to the border region if we play our cards right. The symbiotic relationship, in my humble opinion, if we land a job in Mexico that should be a job created in the State of Texas, I think, rings very true and that is certainly our experience in the Borderplex region.
So, we have this tremendous opportunity that is getting teed up for us very, very nicely and we need to make sure we are ahead of this in a variety of ways.
I am often asked why these jobs are being re-shored from China and I would like to just briefly give you a series of reasons as to why I see this happening both in the near term and in the long term. And this carries over from my prior experience as serving as cabinet secretary of economic development in the State of New Mexico. And I saw it happening ten years ago when I was in public office and I certainly see it being accelerated today because of the following reasons.
First, transportation costs. Today, this morning, as we speak, a half a million cargo containers are floating off the ports of Long Beach and LA. Those cargo containers contain critical supplies in the automotive industry, the aerospace industry, the consumer electronics industry, especially semi-conductors. These (delays) are posing a strategic and very substantial threat, not only to our nation’s economy, but also to the strategic value that can impact our country in a variety of ways, including military.
Second, labor costs. Labor costs in Mexico now are almost at parity with what they are in China and we are seeing increasing labor costs in China that will soon be much, in my opinion – and what other economists are seeing – greater than what they could be in Mexico. And that could be eclipsed in about 24 months.
Utility costs, third. Utility costs, in China are skyrocketing. And reliability of utilities in China is also a big question mark and making companies rethink their investments in China.
Fourth, we all know the political system. The political system in China is punitive. It is essentially an extension… private companies are an extension of the communist government in China. We know that. I have experienced it in a prior life working for a Fortune 100 company. The theft of intellectual property continues to be a problem. The violations of WTO standards from China continues to be a problem and that will not be solved anytime soon.
Most seriously though, in the last four to six months, Xi Jinping, the leader of China, has instituted what he calls common prosperity. Put in different terms it is simply a return to Maoism and, for that reason, businesses are getting scared and they are looking at very much returning to North America for manufacturing and other investments.
Madam Chairwoman, Mr. Chairman, members of the committees, this is an opportunity for us to take advantage of. In the last six weeks, the Chinese government as been very aggressive in forcing large companies to transfer billions of dollars… billions of dollars… hundreds of billions of dollars to this common prosperity program.
Fifth, we know about the geo-political tensions that are occurring, external to China. Taiwan, etc. I won’t spend much time on that.
And finally, last but not least, the quality of the products that are manufactured in China simply do not match the quality of the products that are being manufactured in North America, including Mexico.
So, the border region is a very, very, attractive alternative for these companies. And, as I said before, we are record levels of investment opportunities and we have just recently landed a variety of projects to our region, both in the consumer electronics area, the automotive area, and in the furniture manufacturing sector.
Let me conclude by saying this. The future is very, very bright but has been said before we need to invest, not only at the state level but at the federal level to deal with wait times. I am not going to repeat the prior comments. But I am encouraged. I am honored to serve on the Border Trade Advisory Committee and there is a Border Master Plan. You all have seen it. We have a blueprint. As was mentioned before the $1.2 trillion infrastructure bill in Washington we hope will include our fair share of opportunities for investment in our border region.
But, let me conclude by saying this. Ultimately, the large proportion of what we have been talking about today lies with the federal government and it is, frankly, their responsibility to take care of many of these issues and not pass it along to members of the legislature or the executive branch like yourselves. We need to keep our congressional delegation… their eyes on the ball, to make sure that Texas continues to get its fair share of federal resources to address these issues.
If we aren’t prepared to address these wait times we will lose optimization of job growth in this state and throughout our country. One real life example that I will conclude with is a company in our area that was looking to expand by 100 people. It wasn’t a huge amount of jobs, all things considered but it was 100 jobs. It was the tip of the iceberg at the time. They decided to relocate their jobs to Eastern Europe. Why? Not necessarily because it was cheaper but they could count on a reliable supply chain flow. Transportation flow from Eastern Europe.
Those are the kinds of opportunities that we are going to lose, and multiply that by many, many times if we don’t start planning for what I think will ultimately be an acceleration of this exodus of jobs (from China) amongst other opportunities the our border region will ultimately see.
With that I thank you. It was a pleasure appearing in front of your committee and Madam Chairwoman, Mr. Chair, I am happy to answer any questions.
Editor’s Note: The above testimony was given by Jon Barela, CEO of The Borderplex Alliance, at a joint hearing of the Texas House Committee on Transportation and the Texas House Committee on International Relations and Economic Development in Austin on Sept. 30, 2021.
Editor’s Note: The main image accompanying the above commentary shows Jon Barela on the set of a Fronteras 910 show by hosted by KRWG News in April 2019.
Percentage increase
Reporter Steve Taylor writes:
In the Q&A that followed Barela’s testimony, state Rep. Angie Chen Button, chair of House Committee on International Relations and Economic Development, thanked Barela for flying in to give his testimony. She said it was “music to my ears.” She thanked state Rep. Claudia Ordaz Perez of El Paso, for inviting Barela to testify.
Ordaz Perez asked Barela what percentage increase in trade could occur along the border as a result of re-shoring from China. Barela responded:
“Assuming we get out of this Covid crisis that we are technically still in, I truly believe that the border region is the most logical place to place these jobs. There is no doubt. The labor intensive economy in Mexico and the capital intensive economy of the United States and Canada makes a wonderful combination. And so with that backdrop I truly believe, conservatively, – and certainly I am an optimist but I am also a realist – that in the next 24 months, again – assuming the Covid crisis does not flare up – that we can see an increase of at least ten to 20 percent of freight traffic through our ports of entry, at least in our region.
“I say that because as we speak there are four million square feet of new warehousing and manufacturing space being built in Ciudad Juarez and we have nearly four million square feet of warehousing and manufacturing facilities being built in El Paso. That is eight million square feet of new facilities that will now house thousands of employees on both sides of the border. Now you factor in that truck traffic and you can see how that count is maybe conservative.
“I cannot answer that question on pedestrian count but on truck traffic it could easily be ten to 20 percent in the next 48 months, easy, as I see it. We are working on a couple of major projects in El Paso that would be game-changers for our region and that would certainly change my projections on that. Mr. Chairman and Representative Ordaz Perez, it could be much higher if we land these transformational projects on the El Paso side of the border because they will rely on supply chains in Mexico, ultimately.”
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