Made in Mexico, manufactured by China

An interesting article on April 21, 2024, titled How Chinese firms are using Mexico as a backdoor to the U.S. by the BBC is something that I think everyone focused on the nearshoring issue should read. If you are a consumer of goods, I think you’ll find this article will pique your interest too.   

As companies look to move their production from China to Mexico, they should probably consider doing “know-your-supplier’s-supplier” due diligence to ensure who is the real manufacturer of their goods, because it might make a difference to them. 

With U.S. companies leaving China for other shores—Mexico, Vietnam, Thailand—so too are Chinese manufacturers as they relocate or expand their manufacturing facilities, in particular, to Mexico. In the case of Mexico, industrial park space is being gobbled up by Chinese firms at a fast pace. Once in Mexico, these Chinese manufacturers can legitimately state that their products are “Made in Mexico” because, in fact, they are, and because they are, the products are no longer bound by U.S. tariffs and sanctions. (Is this some sort of supply chain shell game?) And we American consumers never know otherwise. But according to the BBC article, U.S. retailers apparently do, or they should if they really know their suppliers.

This is a benefit for the Mexican economy as Chinese companies invest in and employ Mexican workers. But it does put Mexico in a bit of an uncomfortable political middle position between the United States and China.

I can also see where it might still be a problem for some U.S. companies that want to outsource to a manufacturer in Mexico. One of the top complaints of outsourcing to manufacturers in China was the theft of intellectual property (IP). Would the IP of a U.S. company be any more secure in the hands of a Chinese-owned manufacturer in Mexico? I think that this is where supply chain due diligence needs to take place.

It seems that as much as we try to remove ourselves from the interconnected world we are responsible for creating, we just seem to keep getting pulled back into the same situation.  Nearshoring to Mexico will reduce transportation times and costs, but it doesn’t seem to have done as much to separate us from our dependency upon a top competitor as perhaps we may have thought it would.

To consumers, who owns a factory and where it is located might not matter. But to retailers, consumer brands, and industrial companies, these aspects could be really important depending upon what is being manufactured. Commodity consumer products don’t necessarily have as much secretive IP as industrial electronics and machined components. We live in a globally interconnected and interdependent world. With that realization and understanding, how and where we choose to make stuff needs to be carefully considered to ensure that it is the right decision from one end of the supply chain through to the other.

The link to the full BBC story is:  https://www.bbc.com/news/business-68825118

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