MCALLEN, Texas – There are three great reasons why McAllen Economic Development Corporation is right to focus on China as it seeks to bring in more manufacturing companies. 

One is a provision in the United States-Mexico-Canada Agreement concerning the rules of origin for components when assembling automobiles.

Another is the current Section 301 tariffs that are being applied to Chinese goods coming into the United States.

The third is the disruption to supply chains caused by the coronavirus pandemic. 

This is the view of Jorge Torres, president and CEO of Interlink Trade Services. Before COVID-19 hit, Torres went on two McAllen EDC trade missions to China, both in 2019.

While on one of the China trips, Torres gave a couple of presentations about USMCA and Section 301. “We saw a lot of interest and actually ended up providing assistance to two companies who are seriously working on projects to move to the McAllen-Reynosa area. It is getting traction,” he said.

Recently, Torres was keynote speaker in a webinar hosted by McAllen EDC. The subject of the discussion was: USMCA Update: 2021 US-Mexico Cross-Border Trade: Beyond Covid-19 and the Trump Administration. Torres followed this up with an in-depth Zoom conversation with the Rio Grande Guardian on why McAllen EDC is right to focus on China.

Here is the Zoom conversation:

USMCA provisions for auto sector

Asked why USMCA can help bring foreign manufacturers to North America, Torres said: “Because of USMCA, because of the automotive rules of origin being more strict than under NAFTA, a lot of the automotive suppliers from Asia and particularly China will have to relocate to North America if they want to keep supplying their OEM (original equipment manufacturer) customers, their manufacturing equipment customers.”

Torres pointed out that under USMCA, 75 percent of auto content must be made in North America. This is higher than under North American Free Trade Agreement, the predecessor to USMCA.

“That is going to create an incentive for these (Chinese) companies… to look to North America.”

Section 301 tariffs

With regard to the Section 301 tariffs, Torres said: “These are imposed on a lot of products from China coming into the United States.” He said the tariffs are “obviously forcing companies to locate in North America because they have to make sure that the products that they supply to their U.S. customers are not Chinese.”

If these companies relocate in Mexico, the Section 301 tariffs will not be applicable, Torres pointed out. By doing so they “might be qualifying for USMCA preferential treatment. So, the Section 301 tariffs situation is also another incentive for Chinese companies in particular to relocate over here.”

Torres added: “Those tariffs are not going to go away, at least for this year, and probably not for a couple of years.”

Disruption to supply chains

As for COVID-19 causing a disruption in supply chains, Torres pointed to the difficulty the U.S. experienced at the start of the pandemic in getting components for personal protective equipment, pharmaceuticals and other medical devices.  

“By having China too far from us the pandemic caused a big problem in the supply chain and moving those products to the United States.”

Torres concluded: “So, with those three factors, USMCA and the automotive industry, Section 301 tariffs, and the pandemic, the supply chain logistic issues, all of that provides a lot of incentives, a lot of reasons why Chinese companies would like to relocate to North America, both the U.S. and Mexico.”

Making a pitch

After its successful forays into China in 2019, McAllen EDC, working with the City of McAllen and the State of Tamaulipas, had planned more trips to the country in 2020. Then the coronavirus pandemic struck. However, it has not stopped MEDC from continuing with its strategy. 

Recently, McAllen EDC made a virtual sales pitch to 110 Chinese companies through a webinar hosted by Select USA. Select USA is a federal government initiative to facilitate business investment in the United States. McAllen was in competition with South Carolina and Pennsylvania for the Chinese business.

“It was a zoom meeting. It was very well done, the Consulate did an excellent job of hosting us. Felicia did a great job of putting together the presentation. Our Chinese partner that we work with, he translated it for us, so it was all in Chinese,” said Keith Patridge, president of McAllen EDC.

The “Felicia” Patridge praised was Felicia Villarreal, director of marketing and public relations for MEDC.

“Even during the presentation, we were getting comments on the chat screen about how good our presentation was, the material that we had. So, kudos to Felicia and her team for putting it together, they did an excellent job.”

Patridge said he had follow-up communication from the U.S. Consulate in China. “They said they were getting extremely good comments about our presentation, that the material was extremely useful and that the Chinese companies were appreciative of the presentation.”

Asked if all 110 Chinese companies on the webinar were interested in investing in North America, Patridge said: “Yes.”

Editor’s Note: The main image accompanying the above news story shows Jorge Torres. (Photo credit: Anayancy Ulloa Luna/Mexico Industry)

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