CHOCTAW, Miss — For many domestic companies, the coronavirus has exacerbated troubles they were already having manufacturing in China, after the U.S. levied large import tariffs last year on Chinese-made goods.
The Mississippi Band of Choctaw Indians sees there might just be an opportunity for its industrial base in light of new developments.
“While Mexico – the only low-cost border country with a free trade deal with the U.S. – is expected to be the big winner, our status as a sovereign nation located within the U.S. presents a distinct advantage,” said John Hendrix, director of economic development for the Mississippi-based tribe.
Tax rates, labor and logistics play major roles in determining where manufacturing occurs, remarked Hendrix. “The Tribe has the total package – favorable tax structure, an abundant trainable workforce, and proximity to market.”
The first phase of the China trade deal President Trump struck this year is a positive, remarked Hendrix, but added the coronavirus shows how an over-reliance on China is bad for business.
And the big story is just how many U.S. firms are pulling out of China.
Beyond short-term economic disruptions and increased recession worries, the spreading coronavirus is sowing the seeds of a broad transformation of the global supply chains that for years brought low consumer prices and high corporate profits on products such as cellphones, computers and household goods.
China looks to be the biggest loser as U.S. producers step up plans to reduce their reliance on the world’s second-biggest economy, which has long enjoyed a central, dominant role in an international manufacturing network that ships parts and materials back and forth among different countries before assembling them into finished products.
Some nimble U.S. companies have already shifted manufacturing out of China to escape the coronavirus shutdown. However, U.S. apparel companies usually import extra inventory before China’s Lunar New Year celebrations, which began this year in late January. That extra supply has helped prevent empty U.S. retail shelves so far. But with almost 40 percent of U.S. apparel and 65 percent of footwear originating in China, the clock is ticking.
Last year, for the first time since 2011, the nation’s manufacturing import ratio fell. Meaning the U.S. relied on less imports and higher domestic output, more than it has in the past nine years. Imports from Asia’s low-cost countries (China + SEA) fell from $816 billion to $757 billion year-on-year.
So, what was the reason for this turnaround?
The trade war, of course.
“Throw in the corona virus and you have the perfect storm for China manufacturing and trade,” said Hendrix.
He notes that the global economy has become increasingly interconnected and supply chains have become increasingly efficient. That allows businesses to cut down on costs because parts can be manufactured in one country, assembled in another, and sold in yet another. The ease with which products can be shipped across the world also means companies do not have to warehouse large inventories, which eliminates an added expense.
The risk is that when the global supply chain is disrupted–most recently by the shuttering of factories due to the virus in China–many companies have few alternatives to fall back on. That is especially true of smaller and medium-sized companies that do not have operations in multiple countries.
“And that’s where the opportunity comes in for the Tribe,” said Hendrix. “We have sites and buildings ready for development for a variety of manufacturing or production uses.”
“We are in contact now with companies that are interested in moving their assembly or processing operations to Choctaw lands. As more businesses choose to partner with the MBCI, this will also be beneficial for Mississippi’s economy.”
As one of the United States’ original first nations, the Mississippi Band of Choctaw Indians is the only federally recognized American Indian tribe living within the State of Mississippi. With over 11,000 members, Choctaw lands cover over 35,000 acres in 10 counties. Providing permanent, full-time jobs for over 5,000 Tribal-member and non-Indian employees, the Tribe is a major contributor to the state’s economy.