Nucor, now the
largest maker and recycler of steel in the country, did very well last
year focusing on domestic business. Just ask Nucor stockholders, who saw
their shares surge in value by over 90 percent in 2004.
But the global economy affects all manufacturing companies these days. An
explosion of Chinese demand for infrastructure helped keep the pressure on
steel prices and firmed the international market, says Bob Johns, director
of marketing for Nucor Corp.’s sheet mill group. Johns says Nucor is far
from bullish on global trade, considering Chinese currency manipulation
and the dauntingly lopsided U.S. balance of trade, among other factors.
But the Charlotte-based company is expanding in Brazil and pursuing
opportunities in Australia and Trinidad, primarily focused on helping the
company control more of its raw materials.
And, while meeting domestic orders limited Nucor’s foreign trade last
year, the steel maker considers its North American neighbors of Canada and
Mexico “much like domestic customers. Our most consistent export markets
are Canada and Mexico,” says Johns.
Global trade, it is true, has shuttered plants and shattered communities
across North Carolina. But international commerce is creating jobs here as
well. Nucor’s success in exporting to other North American nations is
consistent with the state’s larger trade picture, according to Peter
Cunningham, director of the international trade division at the N.C.
Department of Commerce. Canada and Mexico comprise the top two foreign
markets for North Carolina products, he says. And their receptiveness to
our goods is growing thanks to a three-year decline in the value of the
“Canada accounts for 24 percent of our total market,” says Cunningham.
Technology gear, computers and computer parts and transportation equipment
led the list of exports by dollar value. Japan, a consistent buyer of
North Carolina chemical products, food and tobacco, ranks third on the
list. Great Britain, which purchased $668 million in North Carolina-made
goods in the first ten months of 2004, is the state’s 4th most lucrative
trading partner. It is followed by Honduras, a voracious consumer of
cotton, yarn and fabric produced here, according to Cunningham’s data.
Behind the numbers, companies prosper in a marketplace that knows fewer
and fewer frontiers. Those that saw the trend coming early appear to be
the ones who’ve weathered globalization best. A few are symbolic of the
benefits firms that think globally derive. At Bernhardt Furniture Co. in
Lenoir, a prime example, employment has remained stable in recent years
even as the industry shed jobs in the wake of fierce competition from
low-wage labor markets abroad. That’s largely because North Carolina’s
oldest furniture company began cultivating international opportunities in
1983. That’s when company leaders first sensed an appetite among North
American consumers for eclectic styles and materials in home furnishings.
“We’ve continued to grow our overall company as our business has become
more global,” explains G. Alex Bernhardt Sr., chairman and CEO of the
privately-held firm. While 1,900 of the company’s 2,000 workers remain
based in North Carolina, the company has employees permanently stationed
in China, Thailand, the Philippines and Vietnam. Many of the company’s
products originate in those and several other foreign nations — Germany,
Brazil and Italy among them, though it continues to manufacture some
pieces in North Carolina, just as it has for four generations. “These
opportunities allow us to offer some different design looks because of raw
materials and craftsmanship that are not easily available here,” Bernhardt
Bernhardt, whose company is a licensee for the Martha Stewart Signature
furniture line, says being savvy about global sourcing has enabled the
company to thrive amid overall deflationary trends in the furniture
industry. “Any piece of furniture you can think of for the home is
probably selling for less than it was a decade ago,” he says. While that’s
great news for consumers, “from the manufacturer’s standpoint it’s
difficult to deal with.”
Yet, while foreign-made supply has transformed the company’s business
model, demand for its furniture abroad also has opened new doors. “We sell
in about 40 foreign countries,” says Bernhardt. Canadian buyers comprise
its largest non-U.S. market, and a steady stream of orders comes in from
Europe, Australia, New Zealand and the Middle East. “They like American
styles and American brands,” Bernhardt says. Additionally, the steadily
falling greenback has made American furniture a bargain around the world,
another factor operating to Bernhardt’s advantage.
Despite Bernhardt’s success, he doesn’t sugar-coat the challenges free
trade has brought companies like his. “There’s no denying that
globalization has cost some jobs at our company and in this industry,”
Bernhardt says. “But we feel our first obligation is to our shareholders —
to keep our company strong and make as many good jobs as we can.” He notes
that the firm’s foreign offices employ U.S. citizens as well as native
workers who are knowledgeable about the host country and fluent in its
native language. As to the first objective, Bernhardt Furniture’s business
is on solid footing, coming off a record year in 2004 when it saw sales
increase in the “low double digits,” according to Bernhardt. “Yes, we’re
growing,” he says.
Foreign demand is similarly boosting the fortunes of North Carolina
tobacco products, another of the state’s oldest industries. About 30
percent of the output leaving Philip Morris USA’s 2.4-million-square-foot
production facility in Cabarrus County heads to buyers in Japan, the
Middle East and other foreign destinations through the company’s global
counterpart, Philip Morris International (PMI). “That’s about 27 billion
cigarettes a year,” says Bill Phelps, a company spokesman.
The company’s sprawling Cabarrus site now employs 2,600, having added 500
workers since 2000. The 20-year-old plant has begun a $200 million series
of upgrades that will crank up output by as much as 16 percent, according
to Phelps. “We’re purchasing 12 high-speed production modules that will be
replacing 18 older modules,” he says. The company is also installing
automated storage and retrieval systems that will boost operating
efficiency and enhance safety. State-of-the-art temperature and humidity
control technologies will extend the shelf-life of supplies. The
three-year schedule of improvements support the company’s goal of
increasing the plant’s shipments to PMI, which is based in Lausanne,
Switzerland. Currently, PMI holds a 14.5 percent share of the
international cigarette market, with its familiar brands — Chesterfield,
Marlboro and Virginia Slims among them — now sold in 160 countries.
North Carolina remains America’s leading exporter of tobacco, according to
the N.C. Department of Agriculture and Consumer Services (NCDACS). The
state also is a leader in poultry exports, currently ranking third, and of
cotton, where it is the seventh largest exporter nationally. Strong demand
abroad for these goods, as well as apples, sweet potatoes and other food
products, makes North Carolina agriculture a $1.4 billion export business.
“In a lot of emerging economies where there is increasing wealth,
American-made food products enjoy a good reputation,” says Charles Hall,
assistant director for marketing at NCDACS.
Hall says his department works assertively with the state’s agribusiness
industry to cultivate markets around the world. “We do a number of things,
depending on the product itself,” he says, noting that some industries
such as poultry and pork have national marketing organizations that
generically promote products overseas. “For the guy trying to market sweet
potatoes, there’s no association doing that,” Hall says. “That’s where our
office comes in.” He and his colleagues connect N.C. suppliers with
foreign buyers on a case-by-case basis. More broadly, they organize
outreach missions and trade shows as well, Hall says.
As in the case with manufactured goods, free trade has its advantages and
disadvantages for N.C. agribusiness, says Hall. Qualitative restrictions
on some food items have made it difficult for meat suppliers to penetrate
European markets, for example. And while the Central American Free Trade
Agreement (CAFTA), now being negotiated between the U.S. and six Latin
American nations, will expand opportunities for N.C. blueberry and
strawberry growers, it will mean new competitive pressures for Tar Heel
peanut producers, Hall suggests.
Suppliers of processed food items also reap the benefits of global trade.
In a 20,000-square-foot space at the Raleigh Farmer’s Market, employees of
Ford’s Gourmet Foods work diligently to fill orders bound for Canada,
Britain and the Caribbean. “About 20 percent of our total product is now
going abroad,” says Patrick Ford, vice president and international
marketing director at the company, a unit of Ford’s Produce. “Hopefully,
we’ll see that number jump to 30 percent over the next two years.” Among
its most popular items: Bone Suckin’ Sauce, ubiquitous in North Carolina
grocery stores, but also increasingly visible beyond U.S. borders.
Ford’s odyssey into international trade began in mid-1994, when the
company rented a 100-square foot booth at the International Fancy Food
Show in New York City in order to introduce its product to 50,000
prospective buyers from around the world. It was there that a
representative from Harvey Nichols, a prominent gourmet retailer in
London, became interested in the firm’s product line. “They are to locals
what Harrods is to tourists,” Ford says. Soon thereafter, Bruno’s Fine
Foods began offering the Ford’s label at its four stores in Toronto.
“We’re now exporting to 16 countries,” Ford says.
In establishing itself in the global marketplace, Ford’s relied on
assistance from several state-supported entities. An export outreach
program sponsored by Wake Technical Community College helped the company
navigate the technicalities involved in selling and shipping across
borders — and getting paid. “We learned about letters of credit,” Ford
recalls, “primarily that we didn’t like them.”
“Every $67,000 worth of exports results in one new job in North Carolina,”
says Wayne Loots, dean of business and industry services at Wake Tech.
Loots works closely with state officials and leaders of the World Trade
Center of North Carolina in helping small firms like Ford’s, whose
workforce now totals 75, understand foreign market opportunities. “If a
business is seeing foreign competition with their products here at home,
they’ll likely find very frequently that there is a potential market for
them in those countries where the competing product originates,” Loots
explains. “We encourage them to check that out.”
This month, Loots will join a group of small business owners on an
outreach mission to Mexico City, where they will meet with U.S. and
Mexican trade authorities and private business leaders. The trips are part
of a regular series; later this year, they will lead delegations to
Canada, Europe and, potentially, China, Loots says. Attendees are
typically business people who are unsure of what it takes to sell to
global customers. Not everyone is encouraged by what they learn, adds
Loots. “Some people turn away; others are now exporting.”
Loots hails the Commerce Department’s permanent trade offices in Mexico,
Hong Kong, Korea, Japan, Toronto and Germany as the unsung heroes of N.C.
exporters. “They are one of the best tools we have,” says Loots. “They are
very diligent and enthusiastic about helping our companies export.”
In the last fiscal year, Commerce’s international trade unit helped
connect 230 N.C. firms with overseas buyers, according to Peter
Cunningham. “That assistance generated more than $50 million in actual
export sales,” he says. The unit’s 25-person worldwide staff works largely
in the field; only 10 are based in Raleigh, Cunningham says. Their work is
augmented by partners such as Wake Tech’s Loots and trade-savvy experts at
UNC’s Small Business and Technology Development Center. The N.C. State
Ports Authority and World Trade Center are also valuable resources to
businesses of all sizes, adds Cunningham. Federal agencies like the Small
Business Administration and the U.S. Department of Commerce International
Trade Administration play a key part, too.
North Carolina, however, can do better in the international marketplace,
suggests Rep. Danny McComas (R-New Hanover). “Surrounding states take a
broader view of international trade than we do,” he says. Statewide
economic development strategies in Georgia and South Carolina, for
instance, integrate closely with port complexes there, McComas points out.
“When you look at BMW in South Carolina and the development of the retail
distribution cluster around Savannah, you see we’re not quite there yet,”
he says. “Our international infrastructure is not viewed as well as it
could be or should be.”
Greater emphasis should be placed on port facilities in Wilmington and
Morehead City, McComas says, and North Carolina’s highway and railroads
are more oriented toward domestic, not global, commerce. But the state’s
status as an international financial center is an asset competing states
lack. It should be leveraged more effectively to wire N.C. businesses into
the global economy, he adds. International airports in Charlotte, the
Triad and Raleigh-Durham could be used to grow international commerce. “I
know people in North Carolina who fly to Germany or London for a dinner
meeting and turn around and return the next day,” McComas points out.
“That was unheard of ten years ago.”
McComas speaks not simply from the standpoint of a legislator. He is also
a businessman whose company, MCO Transport, Inc., is facilitating trade
between N.C. firms and those in other nations. The company does a brisk
business shuttling cargo via truck to and from ports in three states.
McComas founded MCO in 1976 with three trucks and six employees. Today,
its 200-person workforce includes 160 drivers. MCO is now seeking a site
near the Port of Jacksonville, Fla., for its latest expansion. The new
outpost will complement the company’s presence in Savannah and Brunswick,
Ga., Charleston and Wilmington, the firm’s headquarters.
“We handle imports, but our forte is with exports that are time
sensitive,” McComas explains. Most goods originate in Georgia and North
Carolina, and MCO’s client list includes industrial legends such as
Georgia Pacific, Abbott Laboratories, Anheuser-Busch Companies and Dupont.
“Destinations can be anywhere from Israel to Thailand, South Korea,
Russia, Britain and Belgium,” says McComas.
Another of the company’s longtime customers is International Paper, whose
massive mill at Riegelwood supplies market pulp to buyers worldwide. The
product, large sheets of thick paper pressed into tight bales, journeys
from the mill to the Wilmington docks via special trucks designed by MCO
in collaboration with International Paper. “We run IP market pulp 363 days
a year — every day except Christmas and Thanksgiving,” McComas says. “It’s
basically a pipeline on wheels.”