Lifesaving medical devices now made in Mexico
Proposed border tax may highlight difficulty of untangling global trade
TIJUANA, Mexico — The North American Free Trade Agreement has transformed this sprawling border town from gritty party spot to something entirely different: a world capital of medical devices.
Trucks choke boulevards lined with factories, many bearing the names of U.S.-run companies: Medtronic, HillRom, DJO Global and Greatbatch Medical. Inside, Mexican workers churn out millions of medical devices each day, from intravenous bags to artificial respirators, for the global market.
Nearly everyone in the United States who has a pacemaker — in fact, people all over the world — walks around with parts from Tijuana.
When President Donald Trump threatens to redo trade deals and slap steep taxes on imports in an effort to add more manufacturing jobs, he focuses largely on car companies and air-conditioner makers. But the medical devices business makes a particularly revelatory case study of the difficulties of untangling global trade.
The United States imports about 30 percent of its medical devices and supplies. The trouble is, these jobs are among the most difficult to relocate to the United States. To ensure the safety of products that often end up inside the human body, medical devices are strictly regulated and require lengthy approvals from the Food and Drug Administration and other inspectors.
If the companies do keep major operations outside the country, new taxes on imports would most likely increase the cost of their products — a change that could jolt not only the devices industry in coming years, but also health care nationwide.
In Tijuana the factories are bound to stay put for years, at least. During that time, health executives say, a border tax could fracture the industry’s sophisticated global supply chain and force U.S. hospitals to pay more for vital necessities — or worse.
“The real danger is the supplies won’t be available at all,” said Dr. John Jay Shannon, chief executive of the Cook County Health and Hospitals System in Chicago.
U.S. hospitals rely on heaps of bandages and surgical gloves from China, suturing needles and artificial joints from Ireland, and defibrillators and catheters from Mexico. In all, the annual imports of medical devices more than tripled from 2001-16, when it reached $43.9 billion, according to BMI Research, a unit of the Fitch Group.
Mexico is the leading supplier, ahead of Ireland, Germany and China. And few places illustrate this changing landscape, or help explain the complexity of the industry, as well as Tijuana, 20 miles south of San Diego.
The city houses the highest concentration of Mexico’s medical device firms, 70 percent of which are U.S.-owned, according to the local development group. Companies including Medtronic, CareFusion, DJO Global and Hill-Rom-Welch Allyn — some that have their headquarters just up the road in San Diego — have invested heavily in Tijuana, constructing long, low-slung factories tucked into the hilly terrain. Giant banners hanging from manufacturing plants plead for workers to join them.
The high-tech operations emerged after NAFTA helped transform Mexican border factories, known as maquiladoras, into industrial powerhouses. Now, instead of being garment sweatshops, many maquiladoras in Tijuana employ a new generation of Mexican engineers and skilled technicians to make orthopedic devices, surgical equipment and catheters.
The factories have helped remake the city’s reputation from a ribald party town to a locus of sophisticated industrial manufacturing. Roadside shanties made of corrugated metal and plastic abut new apartment complexes painted fuchsia and lime green; late-model SUVs bounce along potholed roads. Workers pass through imposing security gates to begin shifts operating advanced machinery or delicately sewing pig tissue onto stents for heart valves, and trucks zip in a steady line across the border in preclearance, fasttrack lanes into California.
But the possibility of new protectionist trade policies is looming over this buzz of activity. The question for many of the people is whether it will upend the economic incentives that led U.S. companies to invest in the city in the first place.
Trump has argued that a border tax is needed to keep well-paying jobs in the United States and dissuade companies from relying on Mexican workers who earn a small fraction of U.S. wages. Technicians at medical device factories in Tijuana earn about $14 an hour, compared with about $25 an hour for technicians at U.S. factories.
Critics of Mexico’s maquiladoras system contend that wages are kept unfairly low and that workers have been kept from organizing. For companies, though, the savings are clear — as much as 45 percent for labor-intensive products — and have helped fuel the wave of development in Tijuana.
Now, even the city’s unflappable longtime entrepreneurs are unsettled by the shift in trade talk.
U.S. companies draft plans to build new plants — or expand existing ones — years in advance, said Miguel Felix Diaz, vice president of the Baja California Medical Device Cluster, an organization that represents 63 medical device manufacturing plants that employ 60,000 Mexican workers.
“For that reason now,” he said, “you don’t know if you start some operation tomorrow how it’s going to be affected.”