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International Trade Grows 27% in Region

International Trade Grows 27% in Region

MIKE ALLENTRADE: Mexico is Top Trading Partner, Driven By Maquiladoras By Mike Allen Monday, May 6, 2013

The value of goods exported and imported through San Diego continues to grow, largely thanks to its biggest trading partner, Mexico, which makes up about 86 percent of the total trade, according to a recent report from a local think tank.

Showing a remarkable rebound from the depths of the recession in 2009, international trade in San Diego increased 27 percent to $56.5 billion last year, according to a recent study from National University System Institute for Policy Research. Last year, Mexico was the destination for 97 percent of all of San Diego’s exports, and the source of 82 percent of its imports, the report said.

As it has for much of the past two decades, the big driver behind all this trade is the maquiladora industry, which uses Mexico’s cheaper labor to assemble goods, and send them back into this country, said Kelly Cunningham, the economist who authored the report.

“In many cases, the products are designed here and components are exported to Tijuana where they are assembled and then returned as imports to this country,” Cunningham said.

DJO Global, a Vista-based manufacturer of orthopedic devices, is a prime example. The company does the bulk of its manufacturing at a 285,000-square-foot factory in the Otay Mesa section of Tijuana. The plant’s workforce changes depending on demand but averages about 2,000 people, said Matt Simons, DJO executive vice president.

For the first quarter, DJO, owned by the Blackstone Group, reported net sales of $279 million, putting it on track to surpass $1 billion this year.

Medical Device Manufacturing

Medical device manufacturing has been rising in Tijuana, which was home to some 40 companies in this line, and employed about 30,000 people as of 2010, according to the Tijuana Economic Development Corp.

Chris Anderson, the former editor of Wired Magazine, left publishing to set up a business called 3D Robotics, making small drones for hobbyists. He said the maquiladora model he’s adopted makes good business sense because of the proximity of the manufacturing to the design and engineering office it maintains in San Diego.

‘Quick-Sourcing’

“The Tijuana template isn’t so much about outsourcing as it is quick-sourcing. And that’s the way to create thousands of good jobs in the United States,” he said.

The $48 billion that San Diego does in trade with Mexico dwarfs the next largest trading partner, Japan, which did $2.4 billion in trade last year with the city. Next largest was Germany, with total trade of $2.2 billion. In both cases, the bulk of those imports are vehicles delivered by ship to National City’s marine terminal operated by the Pasha Group.

Exports from San Diego increased 42 percent from 2009 to 2012 to nearly $20 billion. Exports to Mexico made up nearly $19 billion of that sum, followed by exports to Japan, Malaysia and Switzerland, the report found.

San Diego has a positive trade balance with six nations: Malaysia, Switzerland, Netherlands, Ukraine, Australia, Austria, and Hong Kong. The rest of the nations export more goods than they import from the city, the report said.

The trade business isn’t limited to the biggest multinational corporations. In recent years, assisted by such agencies as the federal Department of Commerce and the nonprofit World Trade Center San Diego, smaller businesses are finding new customers outside the country.

CMF Global Inc., a Chula Vista distributor of pipes, valves and fittings used for water transmission and irrigation, saw its revenue last year nearly double as it picked up new customers in such far-flung lands as the Philippines, Jordan, Iraq, India and Vietnam.

Recently the company shipped equipment for a Jack Nicklaus designed golf course in Moscow and was averaging one to two of those projects a year in India, said Joseph Fernandez who founded the business with his uncle, Ramon Castillo, in 2002.

“About 80 percent of our sales are exports,” Fernandez said. The increased business led to CMF expanding its staff from one to 10, and it may add two more this year, he said.

While the trade report for the region showed the activity is on the rise, it isn’t accurate because the data culled from federal sources only covers hard goods, not professional services, Cunningham noted. That means all the legal, engineering, financial, and architectural services that are provided to companies south of the border and beyond are not counted.

http://sdbj.com/news/2013/may/06/international-trade-grows-27-region/?page=1&

 

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