Panel: Re-shoring, Near-shoring, Cross- border Movements and Their Implications for Industrial Development Diane Grey, Centre Port Canada Jeff Howell, Panasonic Industrial Devices Patrick Van den Bossche, A.T. Kearney Moderator: Claudia Avila Connelly, AMPIP Claudia Avila Connelly, Executive Director AMPIP, Mexican Association of Industrial Parks • 27 years’ experience in international business promotion, economic development and public affairs, at private and public sectors. • Deputy Trade Commissioner of Mexico in Stockholm and Toronto. Diane Grey, President & CEO CentrePort Canada • Recognized leader with extensive experience in business development and trade. • Deputy Minister of Finance and Federal-Provincial and International Relations, Province of Manitoba, Canada. Jeff Howell, President Panasonic Industrial Devices Sales Company of America • He heads an operation that provides key components to power a variety of products in sectors including consumer, government, business, retail, alternative energy/smart grid and LED lighting. Patrick Van den Bossche, Partner and Board Member A.T. Kearney • Expert in global supply chain strategies, complexity management, manufacturing, and distribution. • He was a senior logistics consultant at Plant Location International’ (which was 20 years ago!) with a more current “Serves clients in a variety of industries, i.e. Chemicals, Consumer Goods, Food & Beverage, etc Is Reshoring impacting industrial occupancy? Current trends of reshoring? “More manufacturers are bringing production back to the U.S., in an effort to cut costs and move closer to customers, among other factors.” Boston Consulting Group December 2015 Current trends of reshoring? • “Reshoring is increasing” Boston Consulting Group (perception survey) • ”Reshoring may be over before it began” A.T.Kearney (based on statistics analysis) Current trends of reshoring? “FDI (Foreign Direct Investment) and Reshoring of activity by US-headquartered companies added 67,000 manufacturing jobs to the US in 2015.” The Reshoring Initiative 2015 Current trends of reshoring? “Around 60 per cent of the reshoring over the past five years has been from China, while the FDI comes heavily from Germany and Japan.” The Reshoring Initiative 2015 FDI inflows: top 20 host economies, 2014 140 (Billions of dollars) 120 100 80 60 40 20 0 Source: UNCTAD, World Investment Report, 2015 Relevant findings from A.T. Kearney’s 2015 Reshoring Index and 2016 FDI Confidence Index Are the trends that are behind reshoring creating meaningful change in the global landscape? •Labor cost gap between US and Asia/China is shrinking BUT … • US labor costs are already creeping up as talent is getting scarce • Labor inflation in China is still high but slowing down • China is investing significantly in Lean/ Automation/ Robots •US energy cost is low due to e.g. shale gas BUT … • Everyone is benefitting from low oil and others have shale gas • Shale gas wells deteriorate much faster than ‘classic’ wells •Made in USA is fashionable (e.g. Wal-Mart’s pledge) BUT … • ‘Price premium’ for Made in America has largely been untested • The overall economic situation of consumers is fickle A.T. Kearney’s Reshoring Index shows that further offshoring continues to outpace reshoring Manufacturing Import Ratio and U.S. Reshoring Index U.S. Reshoring Index %, basis points Manufacturing import ratio +434 basis points 10.5% 10.4% 12.0% 20 7.7% 8.2% 9.0% 9.1% 9.2% 9.6% 10.5% 10.6% 10.9% 0 -1 -11 -12 -20 -18 -55 -44 -30 -40 -72 -60 -80 15 -80 -92 -115 -100 -120 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015f Notes: The manufacturing import ratio is calculated by dividing manufactured goods imports from 14 Asian markets (China, Taiwan, Malaysia, India, Vietnam, Thailand, Indonesia, Singapore, Philippines, Bangladesh, Pakistan, Hong Kong, Sri Lanka, and Cambodia) by U.S. domestic gross output of manufactured goods. The U.S. reshoring index is the year-over-year change in the manufacturing import ratio. Sources: U.S. International Trade Commission, U.S. Bureau of Economic Analysis; A.T. Kearney analysis US Reshoring cases show shifts in reasons for reshoring, pointing to an evolving view on the concept % Cases Mentions Top Reshoring Industries ’15 / ‘14 Top Reasons for Reshoring ’15 / ’14 Electr. Equipment, Appliance, & Comp. 16% / 15% Delivery time improvement 23% / 30% Transportation Equipment 14% / 15% Quality improvement 21% / 29% Apparel 12% / 12% Image/Brand (prefer U.S.) 15% / 20% Computer & Electronic Products 11% / 10% Wage Cost Improvement 15% / 20% Miscellaneous 11% / 7% Freight Cost Improvement 15% / 20% Plastics & Rubber Products 8% / 7% Total Cost of ownership 15% / 17% Machinery 7% / 5% Customer Responsiveness improvement 10% / - % Fabricated Metal Products 4% / 5% Innovation/Product Differentiation 9% / 13% Nonmetallic Mineral Products 3% / - % Higher productivity 9% / 13% Furniture & Related Products 3% / 3% Government Incentives 8% / 14% Chemical -% / 2% Energy Cost Improvement -% / 14% Foreign companies (incl. from China) are investing in US manufacturing operations to capture market share Chinese investment in the U.S. (2000-2014) Source: Rhodium Group; Brookings Institution Our 2016 FDI Confidence Index indicates that US and Canada will continue to attract significant FDI (1/2) • The Americas account for only 4 of the 25 countries in the 2016 Index. However, this includes 2 of the top 3 spots in the Index. – The United States and Canada rank 1st and 3rd in the Index, respectively. – Brazil ranks 12th this year, while Mexico claims the 18th place in the Index. • While FDI inflows to the United States and Canada rebounded strongly in 2015, FDI inflows to Latin America and the Caribbean have been declining in recent years. – This is likely a result of the region being hit hard by the sustained drop in global commodity prices since 2014. • Investors remain more optimistic about the Americas’ economic outlook than other regions. – Executives are also the most positive about the outlook in the United States, with 42% of respondents more positive on the American economy than they were a year ago. However, investors are more pessimistic about the economic outlook in Brazil and Mexico compared to a year ago. Our 2016 FDI Confidence Index indicates that US and Canada will continue to attract significant FDI (2/2) • Executives at firms based in the Americas are more pessimistic about the global economy than are their global peers. – Only 41% of Americas executives are more optimistic about the global economy this year than they were last year, compared to fully 58% of European executives and 48% of Asian executives. • The results of the U.S. elections may reduce FDI into the United States. – Foreign business executives say that they would reduce FDI into the United States if Americans elect a populist (far-left or far-right) president in the November election. • Geopolitical tensions and emerging market instability are front-of-mind for global executives. – Global business executives see an increase in geopolitical tensions as the highest risk in the external environment for the second year in a row. Diane Grey CentrePort Canada The case of Canada At the Hub of Trade Corridors CentrePort Canada is connected to important global markets via the: • Asia Pacific Gateway • NAFTA Gateway • Atlantic Gateway • Arctic Gateway North America’s Largest Inland Port • 20,000 acres with on-site access to tri-modal transportation. • CentrePort Canada Inc. is creating an integrated logistics and infrastructure platform to support business investment and job creation. Tri-Modal Inland Port Industry Leaders at CentrePort Market Trends • Manufacturing of low-end goods has likely disappeared from Canada. • Lower energy costs and consistency of production in North America have driven business to look on-shore for sourcing and growth. • For Canada, the strengthening US economy and weaker Canadian dollar, have worked in favour of domestic manufacturing growth. • Skills and technology upgrading and investment in innovation required to support the shift. Advantages of NA Production • Greater flexibility and responsiveness: including demand for “same-day” experiences. • Enhanced reliability: when you are located close to market. • Sustainability: companies can better meet customer preferences for products that minimize social, economic, and environmental impacts. • Guaranteed Quality: based on North American supply chains CentrePort Projects • Expansion projects for U.S. and Canadian companies • Growth in food processing; composites manufacturing (aerospace, busses and agricultural equipment) • FDI not “reshoring” but market growth. • Mexico Finds Canada via “Central Market” project CentrePort – It’s a Big Deal! CONTACT: Diane Gray President and CEO [email protected] 1.204.784.1300 www.centreportcanada.ca Jeff Howell Panasonic Industrial Devices Sales Company of America Testimonial.