Near-Shoring: The BIG Comeback
If you’ve told someone in the last twenty-five years that your business is logistics, or international trade, or even freight forwarding, you’ve likely been given a layman’s recitation of how NAFTA did something, somehow, someway with which they disagree. But for the familiarity of that trade agreement, there’d be few other discussions to have where people in other industries have foreknowledge of the subject. Even among the industry experts, opinions on the US and Mexico’s relationship run the gamut. The only downside to these conversations comes from the sheer quantity of information we need to impart onto our friends to encapsulate an entire economic history and pinpoint why the things that went wrong did so and how nearly the things that went right almost did not.
While last year, we went into great detail talking about the new USMCA and its differences from NAFTA, we didn’t delve deeply into the way a new agreement could help with the near-shoring prospect coming up more often since trade with China turned precarious due to tariffs and coronavirus-related delays. The US west coast is clogged by containers coming in from Asia like a damn building up to block cargo from moving inland due to bottlenecks. The east coast is also growing the same type of congestion as carriers try to drop on the other side of the nation to avoid the California issues. Houston, however, isn’t experiencing the same ocean cargo stress as the east and west coasts. With no shut down for Lunar new year to allow ports to catch up on the backlogs they just continue to grow. Near-shoring is an option to avoid those issues.
Near-shoring is the practice of bringing outsourced work back to countries with which the corporation shares a border and the biggest discussion revolves around bringing US manufacturers into Mexico to take advantage of the USMCA provisions that sweeten the movement and avoid the delays that inevitably come with a trans-Pacific transit.
Mexico is the largest trading partner of the United States, with more than $614.5 billion moving between the countries in 2019 and 7-11 million trucks crossing the border every year with 15,000 a day crossing at Laredo alone. As Texas recovers from the freezing temperatures early in the year and the border closures caused by the COVID-19 pandemic start to subside, Mexico will be ripe for near-shoring opportunities, especially for those looking to avoid the coastal U.S. ports and ocean delays that plague them.
Warehousing is another option to take advantage of as more companies are moving away from the lean manufacturing issues that arose after the COVID-19 pandemic that saw inventories depleted because storage was held at a premium. The best balance is to hold a bit more inventory so it’s close by in case of calamity.
As more businesses start to reopen in a post-pandemic world, strategic positioning will be the most critical decision they can make to ensure their cargo moves without delays and unnecessary tariff burdens. With BIG Logistics, we have big solutions for shippers who want to near-shore their production into Mexico. Our industry experts are on the cutting edge for procuring space, navigating the updated USMCA laws, and the intricacies of bringing manufacturing to a closer nation.