A routine jobs announcement in Botetourt County offers us a lesson in global economics.
1. We’re dependent on economic decisions made all around the world. Last week, Metalsa Structural Products announced its adding 25 jobs at its plant in Cloverdale. This prompted the usual press release from the governor’s office, which included this interesting line: “Virginia successfully competed with Mexico for the project . . .” This is instructive on multiple levels. First, it’s yet another indication — as if anyone needed anymore — that we’re in a global economy and American workers are competing against the whole world. That’s often a bad thing, because workers elsewhere tend to be paid less — sometimes a lot less. The standard line, from politicians of all parties, is that if there’s a level playing field, they’re confident American workers can out-compete the competition. Here, indeed, is an example of how American workers really did do that. Metalsa has three plants in Mexico; these jobs could have gone there. Instead, the company decided to put them in Botetourt.
The fact that Botetourt County was competing with Mexico raises some other questions: Is this an example of President Trump’s economic nationalism at work? Or is this an example of the North American Free Trade Agreement at work? These are harder questions to answer because the Metalsa expansion actually illustrates the complexity of the global economy.
Yes, Botetourt successfully competed with Mexico here, but this isn’t a straightforward example of “beating” the Mexicans, because Metalsa is a Mexican company. The real winners here will presumably be Metalsa’s Mexican owners; presumably the expansion at this plant in the United States will produce more profit for the company and bigger dividends for the shareholders of the privately-owned company.
Our mental images of other countries are often out of date. If you dine at the Pancho Mexican restaurant in Daleville, not far from the Metalsa plant, you’ll see paintings on the wall that depict the traditional Mexican countryside — men riding burros, and the like. That may still be true, but so is this: As the rest of the world rises economically, however unevenly, we see the rise of foreign companies that rival our own. Metalsa is a global company making auto parts that now has 12,000 employees and factories on every continent except Antarctica. Think about the expansion this way: 25 people in the Roanoke Valley will soon owe their jobs to a decision made by Mexican executives in Monterrey. The existing plant already employs 230 workers, so really 255 people here will owe their livelihoods to decisions made south of the border. The world is a complicated place.
2. Does this announcement tell us anything about trade deals? Yes, but not in the way you might expect. Metalsa was founded in 1956, at a time when the U.S. didn’t sell many auto parts into Mexico and Mexican companies didn’t sell many into the U.S. The North American Free Trade Agreement in 1994 changed all that. Metalsa’s CEO Leopoldo Cedillo told Global Business Reports: “In the 1980s, Metalsa realized it was not going to be sustainable when the borders were to open and we started working with Japanese tools to improve the quality of our products.” Before NAFTA, there were “hundreds” of Mexican-owned auto part plants. When the borders opened, Cedillo said, “only five or six” survived against technologically-superior U.S. competition. One of those was Metalsa, which not only survived, but thrived by being good enough to sell its products into the U.S.
Metalsa actually opened its first U.S. plant before NAFTA — in Hopkinsville, Kentucky, in 1989. NAFTA simply accelerated that process as Metalsa moved more aggressively into the now-open U.S. market. It opened other plants in Kentucky in 1994 and 1997 and then looked to acquire others.
The Botetourt plant was opened in 1996 by a Milwaukee company. At the time it employed 65 workers and was described as the largest factory in the county. The next year, A.O. Smith Corp. sold the factory to a Minneapolis company, Tower Automotive. In 2000, Tower sold the plant to Metalsa. In the span of just four years, the ownership shifted from Milwaukee to Minneapolis to Monterrey. Most economists agree that, on balance, NAFTA created more jobs in the United States than it displaced — cold comfort to those who got displaced, but still an inconvenient finding for those who oppose the deal as bad for workers. It was bad for some workers, good for others. NAFTA rearranged the economy on both sides of the border. Metalsa’s largest U.S. plant is now in Elizabethtown, Kentucky, where it has 2,000 workers, and last year announced it was adding 250 more. In 2017, it added 113 jobs in Owensboro, Kentucky, at a plant where it already has 215 employees. All those American jobs have to count on the “plus” side of the NAFTA ledger. So does the job growth in Botetourt between 2000 and now. The losers are the Mexicans who worked for the homegrown companies that went defunct, so did the trade deal encourage immigration?
3. The auto industry supply chain is a key part of our local economy. The Roanoke Regional Partnership economy development agency counts more than 25 companies in the region that are part of the transportation manufacturing sector — with a total employment of more than 5,100. That includes the Volvo Truck Plant in Dublin, which now employs 3,500 people, more than double that it did in January 2017 (a chronology that would surely cheer those who credit Trump for the current economy). On a proportional basis, we have twice as many auto-related firms as the national average. This sector seems likely to grow: Daimler recently bought Torc Robotics in Blacksburg to gain access to the company’s self-driving technology, and says it plans to grow the 100-person workforce. The Virginia Tech Transportation Institute has grown to become the second-largest university-level transportation institute in the U.S. (Texas A&M has the largest). Today the institute has 520 employees — making it a significant employer in its own right. The institute draws in more than $50 million in sponsored research each year, with more than 300 active projects. Pulaski County Administrator Jonathan Sweet says that between Volvo, Torc and VTTI, the New River Valley is poised to become “the Autonomous Research Triangle.” So, you see, maybe Metalsa was just a routine announcement, after all —routine in the sense that it’s part of one of our region’s unheralded growth sectors.