Commentary

The Global Economy Might Provide Some Answers to North Carolina's Quest to Revive Traditional Industries

Dr. Gary Gereffi
Professor of Sociology
Director of the Center on Globalization, Governance & Competitiveness
Duke University
First appeared in The Triad Business Journal on May 5, 2006

International competitiveness is a ubiquitous yet elusive goal for most economies – everyone wants to attain it, but no one is quite sure how.

The Piedmont Triad region has a rare opportunity for the next three years to take the lead in adapting to the changing global economy by developing a strategy for how to restructure and revive its flagging traditional industries, and to link them productively to high-growth activities. The region will be well served in this effort by consulting examples of similar economies around the world.

At Duke University, a pioneering project on North Carolina in the Global Economy has yielded several ideas that may be useful to Triad leaders as they organize a development agenda funded by a three-year, $15 million grant from the U.S. Department of Labor. The research not only describes the state of seven key industries in North Carolina, but also looks at regions with similar economic challenges around the world for ideas about confronting globalization pressures.

The first lesson from Duke’s research is not to give up on traditional industries, but to figure out how they can adapt to new economic realities. In the textile industry, several of North Carolina’s firms and universities are pioneering the development of "high-tech" non-woven textiles, as well as "quick response" technology to coordinate short-notice shipments to U.S. retailers on a weekly or even daily basis.

Asian apparel manufacturers also are adapting. Hong Kong, Taiwan, and South Korea were among the world’s most successful textile and apparel exporters in the 1970s and 1980s before quotas, currency appreciation, and rising labor costs in the 1990s led them to shrink their manufacturing workforces. Today, firms in these East Asian economies continue to play a critical "middleman" role in the global textile and apparel industry, taking orders from U.S. and European buyers, managing apparel export factories in Asia, Latin America, and Africa, and supplying their own textiles to the new centers of apparel production.

There are global production shifts in furniture as well. In China, new furniture clusters in China’s coastal provinces, such as the Anji chair cluster near Shanghai, have established de facto "supply-chain cities" that integrate large pools of cheap labor with advanced technologies for production and design. Chinese firms, wary of a competitive advantage built on cost alone, are adopting a new "tech-labor intensive" manufacturing approach that weds abundant labor supplies and a heavy emphasis on automation to upgrade quality and to elevate their position in the value chain.

Design is another way to revitalize traditional manufacturing, and Italy has seized the initiative in this area. In furniture, for example, Venice has sought to marry manufacturing and design by bringing together Italian artists and furniture makers in an effort to help rethink the role of design in this industry. As Italian manufacturing increasingly moves offshore, this strategy seeks to bolster key local links between Italy’s creative industries, design, production and marketing.

Service industries, like logistics, can help to root manufacturing in particular places. In Hong Kong, for example, attention to transportation and shipping needs, combined with foreign direct investment, have driven and sustained the strong growth of export-based businesses in nearby southern China. In Italy, logistics and manufacturing are also intertwined. The port of Venice, unlike many in Italy, is bordered by flat plain that can support a manufacturing base near the heart of industrial Europe. City leaders see this proximity as a way to strengthen both its logistics and manufacturing industries, and are currently working with major global companies to build its role as a global logistics hub.

Educational institutions are widely recognized as a key component of regional competitiveness. In the Triad, community colleges and research universities each have an important role to play, coordinating worker retraining (like the innovative Bioworks program) and carrying out detailed research on North Carolina’s competitors, the strengths and weaknesses of its local industries, and the strategic policy choices that the Triad must make to build long-term success.

Here, too, North Carolina can learn from the world. In India, the seven Indian Institutes of Technology have played a key role in fueling the recent information technology outsourcing boom, providing training and a highly competitive environment for India’s best and brightest. In addition, India’s other educational institutions – from technical schools to full universities – have contributed to the country’s economic development and diversification.

Regional economies like the Piedmont Triad are the foundation of U.S. competitiveness, but regional prosperity requires a global vision. The United States no longer has a monopoly on the best technologies or business practices in many manufacturing industries, even though we continue to have the most dynamic market and the most innovative firms. In today’s global economy, we must scan the world for the best ideas in order to successfully build and maintain a sustainable competitive edge.