MCALLEN, RGV – McAllen city and economic development leaders are so pumped by two recent trade missions to China they plan to visit the country FOUR times next year.
Leaders such as McAllen Mayor Jim Darling, McAllen Economic Development Corporation President Keith Patridge, McAllen City Commissioner Victor ‘Seby’ Haddad and businessman Joaquin Spamer gave glowing reports about their recent visit to Shenzhen at this month’s McAllen Economic Development Corporation board of directors meeting.
MEDC has made two trips to China this year, the first to Shanghai and Shenzhen in July and the second to Shenzhen alone earlier this month.
The connections they have so far made may already be paying dividends, with Patridge telling his board of directors that MEDC could be welcoming its first Chinese manufacturer to McAllen within the next few weeks.
“We had a lot of success. Janie counted up the cards and we have over 200 companies to follow up with,” Patridge said, reporting on the most recent trip to China.
Janie Cavazos is vice president for U.S. business development for MEDC. She went on both trips to China.
Patridge said the trade delegation revisited with a number of Chinese companies and contacts that it met on the first visit.
“They were very detailed in their questions. It looks like we could be announcing our first Chinese company next month, if everything goes well. We have two more that are very, very, close, I think,” Patridge said.
As for plans to go to China multiple times next year, Patridge said:
“We will make four trips to China. We will meet with companies, we will continue to build the relationships with the leadership that is there. All of us have committed to making two trips. The group will go four times, each of us has agreed to go on two of those trips over the next year.”
Mayor Darling said the U.S. Chamber is willing to help McAllen in China.
“The Shenzhen Chamber, they asked us to come back. They want to develop relationships, so there is an opportunity not only for MEDC but companies to go there and develop in China,” Darling reported.
“They want us to have a presence there, You cannot come one and establish a relationship. Keith has outlined four trips a year. We will each go two times. You cannot go there, make a friendship, and leave and not go back for a year.”
Darling said Chinese business leaders look at things differently than the Koreans or the Japanese. “It is a learning process. That is why it is important to develop long term relationships.”
“We have heard it multiple times, the Chinese leadership that we have talked to, they kept saying, we have all of these communities, governors, mayors, delegations coming from all over the United States.
“They come over, we have a celebration, we have the dinners, we tell one another how great we are, we shake hands and say we really want to work with you, and then, they said, they leave and they never come back.”
“We never hear from them again. And so there is a certain amount of skepticism. We were there in July and back in October. They said, you guys are different.”
In order to make four visits to China a year, MEDC is going to have to reevaluate priorities within its budget, its president acknowledged.
“We are really going to put a lot of work into it. We did not budget for four trips so I have got to sit down with the team and figure out how we shift our budget around,” Patridge said. I think it extremely important. As the mayor and Commissioner Haddad mentioned, we have to be there. There are a lot of dynamics there.”
For MEDC to even think about four visits to China a year, the group must have a reasonable exception of pulling in significant inward investment. Patridge said his gut feeling is that this is a commitment worth making.
“I have been doing this a long time and my gut feel right now is Chinese companies are ready to move, regardless of the 301 tariffs. If they go away they are still going to move because there are other issues at play. China is getting expensive in a lot of areas.”
Focusing on China and Europe
In his president’s remarks, Patrdige noted that Ralph Garcia, MEDC’s vice president for Mexico operations, had just come back from a business trip to Germany.
“Just as we are working in China, we are also working in Europe. The reason we are focusing on Asia and Europe is because under the USMCA there are some rule changes that will drive foreign companies to start looking at establishing operations in North America,” Patridge said.
“The No. 1 issue is they raised the regional value content, which means the amount of the content of a product has to be produced in the U.S., Mexico or Canada. In order to qualify under the USMCA, particularly in the automotive industry, it has gone up from 62.5 to 75 percent, so it just about requires automotive suppliers and automotive companies to actually have operations in North America.
“Because of that, we have seen a definite increase in automotive suppliers from Asia and Europe that are looking at North America and the border has some really unique advantages for them to locate. So, we need to get in front of them in order to attract them to the area.”
The converse is true for U.S. suppliers looking at setting up operations in Mexico, Patridge explained.
“Just as it is attractive to foreign companies, it is actually less attractive to U.S. supplier companies. It makes them less interested in moving to Mexico because, particularly in the automotive area, there is also a requirement that 40 percent of the value of a vehicle be produced in a plant that pays $16 an hour or greater.
“Because of that it has basically removed the need for U.S. supplier companies to move to Mexico. So, now that USMCA has been signed, but not ratified by the leaders of the U.S., Canada and Mexico, the number of U.S. companies interested in Mexico has gone down to a very small level.
“So, we really have switched our focus to Asia and Europe in order to take advantage of that. These things change all the time, politics may change things and we may be shifting again. So we kind of have to stay fleet of foot on where we are going.”
About the Trip
In his report of this month’s China trip, Patridge said it was good to have Carlos Garcia, the economic development secretary for Tamaulipas, be involved. “It speaks to the binational partnership we have for last 32 years,” he said.
Also critical, Patridge said, were a Chinese husband and wife team living in California that have a large number of contacts in China. “Their company is going be locating a facility in McAllen. They live in California and are extremely well connected in China. They introduced us to some key people,” Patridge said.
One of the highlights of the trip was a trade show put on by the Shenzhen Logistics and Supply Chain Association.
Patrdige said Mayor Darling was a “rock star” at the show. He said he was on stage at the event and also spoke at a banquet held the same evening. “We won an award for the display at the show.”
In order to land Chinese manufacturing firms, MEDC is going to need the financial support of the City of McAllen, its president acknowledged.
“As we talked about during the trip and when we came back, this is where we are going to need the support of the city commission and the mayor because it is very clear that incentives are going to play a big part in this,” Patridge said.
“As a matter of fact, in our meeting with one of the real key companies we are working with, that came up in a discussion in China: what are you going to give us? One of the things we always have to keep in mind is we are competing with the rest of the world. We met with the business attache for the U.S. Consulate in Guangzhou, China, and she verified that there are several states and governors looking at this same company, trying to convince them to go to their particular area.”
Patridge said McAllen is in a “good position” to benefit from USMCA and the 301 tariffs that are currently imposed on Chinese goods coming into the United States.
“There is a very clear, reason that they need to be on board. So, I think we stand a good shot, but, again, money and cost is a big issue. That is something we will be addressing into the future.”
China, the new South Korea for McAllen-Reynosa?
In his remarks, Commissioner Haddad thanked Patridge and his team for setting up a number of key meetings.
“You could tell you really have to be present. It does not work as well over email or over the phone. They really respected our presence. It was very important to have a general presence and that we really are interested in China, having returned again. They took notice. We saw a lot of ports and logistics companies and we were probably one of the only booths representing an area, explaining how to do business in Mexico and the United States. There was a lot of interest.”
Haddad said the people that came to the MEDC booth at the trade show had very specific questions.
“The people at this convention knew what they were talking about, they knew what they were looking for. They understood their industry and you could tell by the questions that were being asked, down to the weights of a 40-ton container, how much it costs to move from Monterrey to the border, taking it from Mexico to Reynosa. They asked extremely pointed questions about the whole process. Hopefully, some of the cards and the general walk-ups will have a positive impact.”
Haddad add that the private business leaders that made the trip, such as Spamer, Daniel Cavazos, and Laura Warren, played a critical role.
“We really had a team that could answer almost any question. That was extremely important because you could see everybody bouncing off each other. You could see the different expertise coming into play. Hopefully there will be a couple of victories coming up so we can continue to make the trips. Our continued presence will be important in acquiring future business from China.”
In his remarks to the MEDC, Spamer, a Mexican businessman who exports U.S. cotton to Mexico and Asia, said:
“I think one of the biggest accomplishments is the fact that MEDC and Keith have created very strong relationships in China now. This is going to bring about great opportunities for this area. As we move on, those relationships should grow and I think China is going to become the new South Korea for McAllen and Reynosa, with new businesses moving into the area. The relationships… as, Keith said, now that the mayor is now one of the most popular guys in Shenzhen. With time, it is going to develop into something very big.”
MEDC CEO Patridge ended his remarks by urging Rio Grande Valley leaders to lobby Congress to pass USMCA.
“One of the biggest things we need to do is lobby our legislators to at least do something this session, which is approve the USMCA,” he said.
Talking to his board of directors, Patridge said:
“If any of you have a chance to visit with any legislator, push them to get USMCA passed. It is real key in our efforts and it will be something that is going to be really important for the border and particularly McAllen and our area.”
Editor’s Note: The main image accompanying the above news story shows then-McAllen EDC Chair Laura Warren, McAllen Mayor Jim Darling, and McAllen EDC President Keith Patridge in Shenzhen, China. Warren is also featured in the other photo embedded in this story. (Photo Credit: McAllen EDC)