Global trade seen as scourge and savior
Global trade seen as scourge and savior
Date: Sunday, December 29, 2002 11:31 PM
H-1B and JOB DESTRUCTION NEWSLETTER
www.ZaZona.com
Check out the story in today's Charlotte Observer. The immigration lawyer
who makes six figures a year according to the article goes on to say that he
just sent someone to Russia to recruit scientists for a drug company in the
U.S. because there simply aren't enough scientists. The article finishes
with the statement that education is the key. I have already sent my
response. I hope many of you will do the same. We can't let the media keep
getting away with this.
(commentary and article provided by Linda Evans, a subscriber to this
newsletter)
http://www.charlotte.com/mld/charlotte/business/special_packages/despair_in_mill_town/4833193.htm
Posted on Sun, Dec. 29, 2002
Global trade seen as scourge and savior
Rural viewpoint more negative than cities'
CHARLES LUNAN & TONY MECIA
Staff Writers
When proponents of free trade trumpet the benefits of globalization, they
often point to workers like Stephen Hader.
Perched in an office on the 30th floor of a Charlotte high-rise, Hader is
building the global-services practice for Parker Poe Adams & Bernstein LLP,
one of Charlotte's oldest and biggest law firms. He helps companies obtain
visas for foreign workers. He offers tax and intellectual-property advice to
companies that shuffle workers, money and technology across international
borders. And at age 40, he commands a six-figure salary. The work he does
pumps millions of dollars in legal fees into the Charlotte-area economy.
But just four hours west of Charlotte's glistening skyline, in the mountain
town of Andrews, laid-off factory worker David Cornwell offers a different
view of global trade. After 10 years of cutting wood at a furniture mill,
Cornwell has not worked in two years. He fears he must leave his cherished
home to find employment, even after retraining for a new career in
computers. The textile and furniture mills that once employed thousands
there have closed, some of the work sent to lower-cost plants in Mexico.
The odds of landing a job in Cherokee County, he says, are "between slim and
double slim."
As the United States struggles to emerge from its worst manufacturing slump
in 40 years -- a slump made worse for some by global trade -- such is the
schizophrenic nature of the Carolinas economy.
As part of a yearlong series examining the accelerating decline of the
Carolinas textile industry, Observer reporters interviewed workers, business
owners, politicians and economic-development officials in dozens of big
cities and small towns. What emerged was a two-sided portrait of a region
torn in half by globalization.
In urban centers such as Charlotte, Research Triangle Park near Raleigh and
Greenville, S.C., the global push has spawned an abundance of new
professional and even manufacturing jobs. Yet in countless smaller towns,
home to some of the region's most vulnerable workers, those same intractable
forces have brought little but economic hardship.
The Observer found that few Carolinas communities are prepared for dealing
with the ill effects of this brave new world -- the mass layoffs, the
shrunken tax revenues, the displaced workers. Regionwide,
economic-development efforts are spotty at best, and towns suffering equally
often find themselves fighting to lure the same employers.
Worker retraining is problematic, too. While community college classes are
exploding with new students, many of those students are retraining for jobs
that just don't exist in their towns.
Billy Ray Hall, president of the N.C. Rural Development Center Inc. in
Raleigh, says North Carolina now stands at an economic crossroads.
"If we don't find a way to transition 2 million folks in the rural labor
force to emerging, high-knowledge jobs," he says, "then we are in for cold
times."
The stakes are enormous. The Bush administration, hoping to jump-start a new
round of trade talks, said last month it wants to eliminate tariffs on
virtually all manufactured goods worldwide by 2015. The plan would cover
products ranging from big-ticket items such as cars and machinery to
labor-intensive consumer goods such as clothing and textiles.
Faced with plummeting income tax revenues, elected officials in both states
are taking note. Much of S.C. Gov.-elect Mark Sanford's economic platform
was based on a report by The Palmetto Institute, a group of business and
academic leaders frustrated that the state's income levels stalled during
the 1990s when the rest of the country was booming. In North Carolina, a
board appointed by Gov. Mike Easley has recommended shifting tax breaks
toward start-up and technology companies, spending more on research at state
universities and streamlining the permitting process in a bid to make the
state more competitive. In both states, budget discussions are increasingly
dominated by the need to attract and better serve fast-growing industries
such as biotechnology.
"If we fail, we will be like any other business," says Easley. "We will be
bankrupt. We won't have the funds available for education, our work force
skill levels will decline, business and industry will spurn North Carolina,
and our standard of living will decrease."
A global gold mine
In Charlotte, those who espouse free trade would be hard pressed to find a
more suitable ambassador than Hader, the Parker Poe attorney.When Parker Poe
approached him at a New York law firm in 1997 and asked him to move to
Charlotte, his wife's first question was, "Charlotte, is that near the
beach?"
Hader quickly learned it was not, but he also learned Charlotte has direct
flights to London and Frankfurt, Germany, and that he could afford to buy a
home here for his growing family.
"I brought my clients with me from New York," he said. "They could care less
whether I'm from New York or London."
In fact, Hader has found Charlotte's lower costs to be an advantage, and he
is winning business from companies outside the Carolinas, marking a
milestone for Parker Poe.
By 7 a.m. when Hader arrives at work, there are 30 to 40 e-mails waiting
from clients in Europe. Since the Sept. 11 terrorist attacks, Hader's staff
is getting more calls than ever from British, German and Swiss companies
anticipating stricter enforcement of U.S. immigration, technology transfer,
customs and tax laws.
And next month, a Russian attorney in Hader's office will travel home to
recruit scientists for a pharmaceutical client in the West.
"There are simply not enough scientists in the U.S.," Hader said, noting
that part of his practice also involves helping foreign students get visas
to attend North Carolina's prestigious universities.
Billings for Parker Poe's global-services division are up 15 percent this
year, on top of 12 percent last year and 25 percent in 2000. Now Hader is
toying with the idea of opening a foreign office, possibly in London.
Parker Poe has joined hundreds of Charlotte-area firms exporting services to
a world hungry for U.S. expertise. At Crisp Hughes Evans LLP, a Charlotte
accounting firm, Hunter Cook, an audit partner, works with clients in health
care, other industries and a handful of foreign manufacturers. When he
joined an accounting firm in 1983 in Charlotte, he was assigned 18 textile
companies as clients. When he left 13 years later, only one of those
companies remained.
Global trade has been a boon for hog, poultry and other farmers. And some
manufacturers, even in rural areas that lack the air connections,
universities and other amenities deemed crucial by so many, are thriving.
>From its headquarters in Hartsville, S.C., about 70 miles southeast of
Charlotte, Sonoco Products Co. operates a web of 300 plants and offices in
32 countries. Founded in 1899 to make paper cones for the textile industry,
Sonoco sold $2.6 billion of industrial and consumer packaging products in
2001. While the company has closed or sold 14 U.S. plants in the past two
years and cut 1,000 of 18,000 jobs, sales in Europe, Asia and Africa are
growing faster than in North America. Last year, they accounted for 20
percent of its $2.6 billion in revenue.
"We are following our customers around the world," Harris DeLoach, Sonoco's
president and chief executive officer said of companies such as General
Mills, Nestle, Knorr and Allergan.
Just as Sonoco is opening plants overseas, foreign companies are opening
plants in the Carolinas.
In 2000, foreign companies had $53 billion invested in the Carolinas, or 21
percent of the Southeast's total, according to the Bureau of Economic
Analysis.
Foreign companies employed nearly 400,000 workers in the Carolinas,
including one out of every six manufacturing workers in North Carolina.
When presented with numbers like those, most economists say they are
convinced that global trade, in the long run, will only help the Carolinas.
"Yes, we've lost 500,000 textile jobs in the last 50 years, but we have
created 2 million new jobs," said Jim Smith, an economist with UNC Chapel
Hill. "And most of them pay better."
Pressure to relocate
In Andrews, Cornwell still awaits the promised perks of global trade.
After giving up hope of landing another factory job, he went back to school
and became certified as a Cisco technician, which means he can install
equipment used to connect computers to the Internet.
But no one is hiring Cisco technicians in Cherokee County, which was
described this fall as one of North Carolina's 20 "connectivity challenged"
counties by the state Rural Internet Access Authority.
Inside his home, across a one-lane bridge that crosses Hanging Dog Creek, he
updates his resume. "Willing to relocate," he types tentatively on a Compaq
computer he could barely turn on just two years ago.
A slender, contemplative man with glasses and a graying beard, Cornwell says
he doesn't want to leave. He grew up in these parts, learning to fish and
hunt here as a boy, before the McDonald's and the skating rink and the
bowling alley opened. His elderly parents, who refuse to install a
telephone, live next door. His four grown children and three grandchildren
live in the area as well. His house, a modest two-bedroom mobile home, is
paid for.
Cornwell has relatives in Daytona Beach, Fla., and has heard there are jobs
there. Maybe that is where he should go, he says.
Just five years ago, Andrews was a thriving hamlet that cranked out blue
jeans, furniture and outboard motors. The town sprouted about a century ago
around a tannery alongside the Valley River, at the base of the Great Smokey
Mountains. Its name was made infamous in 1998 as the site of an FBI manhunt
for Eric Rudolph, suspected in abortion clinic bombings.
Even here -- two hours from Asheville, Atlanta and Knoxville, Tenn. --
workers can't escape the global economy. The best-paying jobs have dried up
fast. VF Corp., the Greensboro-based maker of Lee and Wrangler jeans, shut
its plant in January, laying off 500. Baker Furniture closed two years ago,
laying off nearly 300, citing high costs. And in 1999, Levi Strauss & Co.
shut its blue-jeans plant in nearby Murphy, laying off 400. VF and Levi both
moved production offshore.
After the VF plant closed, Andrews was forced to hike water and sewer rates
by 15 percent to cover lost revenue. The county's biggest employers today
are the hospital system, the public schools and a Wal-Mart SuperCenter.
At Peggy's Depot, a popular breakfast hang-out inside a yellow,
concrete-block building that once housed a T-shirt sewing factory, locals
congregate each morning to discuss politics, the stock market and the events
of the day. Ask them about the local economy and, in between bites of
egg-and-ham sandwiches, you get a mouthful.
"Our children have to leave here to get a job," says Gregg Myers, a
39-year-old heating and air-conditioning installer. "Kids don't make it
cleaning hotel rooms, working at McDonald's. You want your kids to make it
in a blue-collar job."
"NAFTA hasn't helped -- it hasn't helped anyone in North Carolina," says
Jerry Cox, 59, who sells construction equipment, referring to the North
American Free Trade Agreement, which lowered trade barriers between the
United States, Mexico and Canada.
Looking for the right lure
The challenge for elected officials in the Carolinas is making sure people
like Cornwell and communities like Andrews don't fall further behind.But
trends in manufacturing will make that difficult. The union-free labor,
hydroelectric power, railroads and extensive rural road networks that once
lured manufacturing to the region are less valuable to modern manufacturers.
"The nature of contemporary manufacturing is small, more flexible companies
that have to work within fairly dense networks of suppliers and vendors, as
opposed to the kind of thing you see out in rural North Carolina -- a big
box that uses repetitive skills," said Alfred Stuart, a retired professor of
geography at UNC Charlotte and co-author of the N.C. Atlas. "Those are
dinosaurs."
Nevertheless, the state's most generous tax credits remain geared toward
luring manufacturers to rural areas with the highest unemployment rates. The
state has spent millions connecting small towns with four-lane roads, even
as it withholds money from cities that are generating most of the new jobs.
Critics say the futility of this approach is best illustrated, perhaps, by
Global TransPark. Using $53 million in state funds, the 15,300-acre
industrial park and air cargo complex was built in rural Kinston, 40 miles
from the closest interstate exchange and about 65 miles southeast of
Raleigh. But 10 years later it remains largely vacant and Federal Express,
which promoters had hoped would anchor the park, chose instead to build a
$300 million hub in Greensboro to be closer to shippers and highways.
After years of cutting property taxes and rebating payroll taxes to lure
more-modest projects, the average per capita income in South Carolina
remains stalled at 81 percent of the national average.
With tighter budgets and higher unemployment looming, 2003 will be a pivotal
year in both states. In South Carolina, where Republicans will control the
executive and legislative branches for the first time since Reconstruction,
Gov.-elect Sanford is determined to eliminate the state income tax to lure
wealthy entrepreneurs and retirees now headed for Florida.
"We are at a critical point," said Sanford. "Because if you look at where we
are with income versus other states, that gulf is expected to widen in
coming years, particularly in relation to Georgia and North Carolina."
Sanford said he wants to repeal tax loopholes geared toward luring industry.
Instead, he would give local governments more taxing authority and free them
to compete for new employers.
In North Carolina, Gov. Easley says the state must pump more money into
education and build on its lead in biotechnology.
"When the economy turns and you are a CEO and you say, `Where can I go for a
skilled work force?' it's not going to be states that are cutting
education," he said, noting that 23 states have cut K-12 spending during the
recession. "You are not going to put a $300 million plant in some place
where they've just cut education."
Both states will be looking for ways to streamline Balkanized
economic-development efforts that now span universities, community colleges,
a half-dozen state agencies, hundreds of local governments and dozens of
public-private partnerships.
Eliminating parochial rivalries could be the single-biggest challenge to
creating more jobs in rural areas. Increasingly, local governments will be
pressured to share the cost of providing land, water, sewer, roads, worker
training and tax breaks.
There will also be increasing pressure on state universities to transfer
technology created in their research labs to home-grown companies that are
less inclined to close Carolinas operations when the economy sours.
Making the most of assets
How long all this will take is, of course, hard to say. Textile employment
has been declining in the Carolinas since the 1970s, and with China emerging
as the new center for low-cost manufacturing, the industry is bound to shed
thousands of more jobs. The furniture industry is just beginning to shift
production overseas, and even customer service and software development work
is moving offshore.
China, India, Taiwan and South Korea, meanwhile, are graduating record
numbers of engineers, and the surplus of low-skilled labor keeps growing in
Mexico. Whether these workers stay home or come to the United States matters
little. Either way, they will eventually compete with U.S. workers for
tomorrow's jobs.
"You can't export a construction site, but even that industry has gone
global by bringing in cheap labor with illegal immigrants," noted Hader, as
he leaned back in a leather chair in the richly burled walls of Parker Poe's
boardroom. "Look at all the Mexicans building homes in Charlotte."
What those displaced by globalism in the Carolinas must decide is where and
how they want to compete in this emerging world.
"The most important asset we have is human intelligence and ability," said
Hader. "My fear of globalism is that if we are not careful, our most
valuable asset will be outsourced, because it can be done cheaper somewhere
else. It's all about education. Education is key."
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