A new wrinkle in the Texas-California rivalry: trade with China

(Omar Ornelas/AP)

A new wrinkle in the Texas-California rivalry: trade with China

Don Lee

March 7, 2024

As if it weren’t worrying enough that more highly qualified, well-paid workers have left California for Texas, evidence shows that the Lone Star State has begun siphoning trade dollars and countless jobs away from the Southlands’ ports and the distribution centers of the United States. Home Empire.

And the clear cause of the new wrinkle in the Texas-California rivalry is not some new policy or programs adopted in Texas to make it a bigger magnet for economic activity that used to take place in California.

Instead of



It is a result of US-China trade that began when Donald Trump occupied the White House and has continued with President Biden’s efforts to reduce US dependence on China, especially for high-tech products related to national security and other issues.

To avoid U.S. tariffs and trade restrictions, Chinese companies have sharply increased investment in Mexico, trucking products to the United States instead of shipping them by sea through Southern California’s vast port and distribution systems.

The ports of Los Angeles and Long Beach are the busiest in the country, handling approximately 40% of all ocean freight from Asia. But last year, the number of 20-foot-equivalent containers from China entering the San Pedro port complex fell by a combined 12.5% ​​from 2022, to the lowest level in at least a decade, according to data from S&P Global Market Intelligence.

Less business simply means fewer jobs, said Gene Seroka, executive director of the Port of Los Angeles. He said every four containers translates into one job.

That’s the implication, Seroka added.

Economically, where we all spend our money, if this charge doesn’t come through it will be less and choices will have to be made.

China’s share of all containers entering the Port of LA still remains dominant, at 53% last year, although that’s down from 57% in 2022. Seroka sees that percentage dropping to the mid-20s in the coming years 40.

The Southlands’ total freight volume has increased significantly in recent months, thanks to the end of labor contract negotiations and diversions to the west coast due to military conflict and drought that disrupted the Suez and Panama Canals respectively.

But in the longer term, according to Seroka, the declining number of Chinese incoming containers must be accommodated elsewhere. In addition to some 15,000 dock workers, the two ports support hundreds of thousands of jobs in the region in freight transportation, warehousing, trade finance and countless small businesses.

California’s strict environmental regulations and high operating costs are increasing the pressure.

Certainly, increased Mexican imports also benefit from this


Southern California, which has historically received a large volume of land-based trade, especially electronic products that reach the San Diego border. But the largest entry point for Mexican goods is Laredo, Texas, just north of the major manufacturing center in Monterrey, Mexico, and then El Paso, near Juarez.

With more and more goods coming from Mexico, Texas is geographically and favorably located, said Sung Won Sohn, an economics professor at Loyola Marymount University.

Tom Fullerton, a border economist at the University of Texas at El Paso, says many things made in Mexico are intermediate components, many of which travel back and forth across the border as many as a dozen times. About 90% is transported by trucks. No wonder truck driver employment in Texas is growing non-stop, while California has come to a screeching halt, according to the Bureau of Labor Statistics.

Increased Chinese investment simply creates more business opportunities for Texas companies, Fullerton said.

Currently, the trading economies in both Texas and California are facing some headwinds, including a slowing U.S. economy due to anti-inflation efforts, plus cutbacks by retailers and other buyers who have overstocked goods as U.S. consumers have slowed their spending shifted from stuff. to services such as travel and entertainment.

Now that we’ve filled the house with everything, everything we can carry and use for years, they say, let’s go to the movies, to the ball game, said Jock OConnell, a California-based trading specialist at Beacon Economics. American demand for imported goods everywhere is declining.

he said.

Last year, US imports of all goods from China, by ship and air, fell by as much as 20% compared to 2022, to $427 billion. The Commerce Ministry reported on Thursday that Chinese imports in January were slightly higher than in December, but 6% lower than in January last year.

Meanwhile, U.S. imports from Mexico continued to rise in January and compared with a year earlier, widening the lead over China. Mexican imports rose after the worst of the pandemic passed, reaching $476 billion last year. It was the first time in more than two decades that Americans bought more goods from Mexico than from China.

Overall, the U.S. trade deficit for all goods and services fell nearly 19% last year, the biggest decline since 2009, as Americans bought less foreign and Chinese-produced oil.


telephones, toys and household items. In January, the trade deficit rose to $89 billion as US exports fell from December and a year earlier figures.

Efforts to diversify production outside of China

has had

This has been going on for years, partly as a hedge against political risks and rising labor and operating costs in China. But the move to Mexico and some other countries gained momentum after then-President Trump imposed high tariffs on a wide range of Chinese imports in 2018.

President Biden has not lifted them, and in some ways has further tightened the trade screws on China. The pandemic contributed to the so-called reshoring or near-shoring momentum, as multinationals, plagued by a collapse in transportation and supply chains, sought to get closer to their markets.

Harry Moser, founder of the Reshoring Initiative to Bring Manufacturing Back to the U.S., says changes in countries’ trade volume don’t tell the whole story. While he called the decline in the U.S. trade deficit with China last year a good thing, Moser questioned whether the U.S. is really less dependent on China.

What is happening, he discussed, is that there is a significant diversion of trade from China to Mexico. And he fears things could get worse, pointing to Chinese company BYD’s plans to build an EV factory in Mexico for export to the US. Even Tesla, which makes its cars in both Shanghai and Texas, is apparently suggesting some of its Chinese suppliers be located in Mexico, he said.

It’s no time to celebrate the Chinese news, Moser said of the reported drop in Chinese imports to the US

Apparently there is no reason to celebrate in the Southland either.

Chinese auto parts companies are among the most aggressive in ramping up investments in Mexico. Thirty-three Chinese-origin auto parts suppliers are now registered in Mexico, and 18 of them exported $1.1 billion worth of products to the U.S. last year, a 15% increase from 2022, said Michelle Sagrero, communications manager at INA, the auto parts industry. association in Mexico. She said more Chinese investments are in the works, although she said it was too early to reveal how many.

jumpsuit, Although Chinese foreign direct investment in the U.S. has stalled, it has continued to grow in Mexico, reaching $2.5 billion in 2022, a fivefold increase between 2000 and 2004, according to Red ALC-China, a nonpartisan network of academics in Mexico and other countries. The figure for Chinese investment in 2023 has not yet been published, but will be significantly higher, said Enrique Dussel Peters, coordinator of the Center for Chinese-Mexican Studies at UNAM, a university in Mexico City.

Trade between the US and China has undoubtedly played a major role, he said. In his study for a United Nations

Economic group Dussel Peters found that companies exporting goods from China to the US paid 18.8% of the value of their shipment in tariffs and transportation costs in 2021. The comparable costs for exports from Mexico to the US are 1.05%.

The difference is substantial, to put it politely, he said.

Dussel Peters says he expects more Chinese and other foreign companies to invest and establish themselves in Mexico. Mexico has free trade agreements not only with the US, but also with several dozen other countries, and also has its own sizable domestic market. But he noted there is one potential problem. So far, Washington has not pushed hard to pressure Mexico to follow the US on Chinese trade and investment.

There is always the threat that the US will become more serious about enforcing US regulations and restrictions, Dussel Peters said. You can’t continue to have a trade war and a deep conflict and have a major US partner with a sign to the Chinese: Welcome to Mexico.


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