Tar Heel Tattler - June 2005

Cheap imports kill mills as wharf fare heats up
By Edward Martin

During the past 10 years, Tar Heel textile makers have closed factories, laid off workers and moved a good portion of what production they have left offshore. The most-cited reason: a glut of cheap imports. But imports — combined with good timing on a channel-dredging project — have caused a boom for another segment of the state’s economy.

Traffic at the state ports in Wilmington and Morehead City was up about 25% for the first nine months of the fiscal year that ends in June. Much of the increase has come since January, when China’s admission to the World Trade Organization eliminated tariffs on its goods. Among the fastest-growing imports are textiles, furniture, apparel, electronic parts and bulk commodities such as metal and lumber. Most of the state’s container traffic goes to the Wilmington port, while Morehead City gets mostly bulk cargo.

Wilmington has seen the greater increase. Imports of textiles and apparel were up about 70% from the previous year. Volume is being fed by overflow from rival ports such as Charleston, S.C., Norfolk, Va., Savannah, Ga., and New York.

Some of that cargo is coming from the West Coast via the Panama Canal. That’s where timing comes in. The N.C. Ports Authority completed deepening the shipping channel to 42 feet in January 2004. Before then, many container ships couldn’t have reached the docks.

Economists expect the effect to ripple out. “Of all the economic activities a state can have, ports have the highest multiplier,” says Jim Smith, an economist at UNC Chapel Hill. “Every dollar spent importing or exporting through a port adds $12 to state income. People build warehouses. More trucks come, and you improve highways.”

The boom can backfire. Ernie Beauregard is president of Reefco Logistics of Raleigh, which exports about 200 containers of beef, poultry, sweet potatoes and other food through Wilmington each month. He says some shipping lines send empty containers back to China and other countries rather than wait for small shipments to fill them. Small shippers have seen rates rise as much as 30%. “We’re having to book space on ships two or three months out.”

Nor is the boom at the ports likely to lift the gloom in Tar Heel factories. Since 1994, the state has lost about 165,000 textile jobs. The pain won’t be confined to mills. China’s cheap wages for furniture manufacturing — 50 to 75 cents an hour — more than offset the $2,800 cost of shipping a container of furniture to the United States. A study by UNC’s business school doesn’t mince words: “The United States furniture industry is in trouble.”