Center on Globalization, Competitiveness. ke.edu/ p://cggc.duk Source: http

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1 Global Value Chain Analysis: A Competitiveness Framework for Ocean Technologies Companies in Nova Scotia Gary Gereffi Director, Center on Globalization, Governance & Competitiveness (CGGC) Duke University Durham, NC / USA ggere@soc.duke.edu

2 Agenda About CGGC Global Value Chain Analysis GVC Analysis of Recent Economic Crisis and Its Impact on Global Industries North Carolina in the Global Economy Nova Scotia and Ocean Technologies 2

3 About CGGC Introduction

4 Center on Globalization, Governance, & Competitiveness ke.edu/ p://cggc.duk Source: http 4

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6 Global Value Chain Analysis Overview

7 The Global Value Chain Approach FOUR dimensions: 1) Value chain: raw materials inputs final product 2) Geographic scope 3) Analysis of lead firms and governance 4) Institutional framework Global value chain analysis provides both conceptual and methodological tools for examining the global economy Top-down down: a focus on lead firms and inter-firm networks, using varied typologies of industrial governance Bottom-up: a focus on countries and regions, which are analyzed in terms of various trajectories of economic and social upgrading or downgrading 7

8 What is a value chain? A value chain describes the full range of activities that firms and workers carry out to bring a product from its conception to its end use and beyond. Source: CGGC ( More Information: Global Value Chains ( ) 8

9 Mapping main firms and supply chain segments Hog Farming Table 1

10 GVC Analysis of Recent Economic Crisis and Its Impact on Global Industries Sectoral Illustrations

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12 ACCELERATED SHIFTS IN GLOBAL DEMAND AND PRODUCTION Shifts in global demand Shifting markets to the South Opportunities for upgrading (new markets) Possibilities of downgrading (lower standards; less value added) Shifts in global production Consolidation of global l value chains Upgrading (capture more value) Downgrading (more intense competition) 12

13 1. Changes in the Apparel Industry

14 Value-Added Curve in Textiles 14

15 Two Crises in the Apparel Value Chain MFA-ATC ATC Phase-Out ( /2007) Elimination of quotas Created global overcapacity in production Current Economic Crisis (2008-Present) Decline in consumer purchasing Decline in export volumes and value Decline in apparel employment 15

16 Shifts in Top 10 Apparel Exporters: ($US Billions) Value China EU-27/EU-15 Turkey Bangladesh India Vietnam Indonesia Mexico 30 United States Year Source: WTO Interactive International Trade Statistics; Top 10 based on 2008 statistics (US$ billions). EU values represent EU-15: ; EU-27: Thailand 16

17 Country Leading Apparel Exporters, 2009 Export, Employment and Wage Statistics Export Value, US$B (a) Employment (b) Estimated Employment Loss and % Total (b) Apparel Export Dependence (c) China $ T&A: 30 million 10 million (33%) 84% 8.4% Extra EU-27 $ Turkey $ % India $10.90 T&A: 35 million 300,000-1 million (0.9-3%) 6.1% Bangladesh $9.40 T&A: 3 million 0 (0%) 71.1% Vietnam $9.00 T&A: 2 million 20,000-30, ( %) 15%) 14.3% Indonesia $6.30 T&A: 1 million 41, ,000 (4-10%) 4.5% Mexico $4.90 T&A: 750,000 36,000-80,000 (4-10%) 1.7% Pakistan $3.90 T&A: 2.5 million 200,000 (8%) 19.2% Cambodia $3.60 A: 352,000 74,500-75,500 (20-22%) 84.8% Sri Lanka $3.30 A: 270, % (a): UNComtrade, SITC 84; (b): Forstater, M. (2010). ILO Report: Implications of the global financial and economic crisis on the T&A sector. (c): WTO International Trade Statistics Report (2009); (d): Jassin-O Rourke Group: Global Apparel Manufacturing Labor Cost Analysis

18 Sourcing Trends Buyers Suppliers Growing reliance on China Lead firm consolidation (buyers, mfrs, traders) Supply chain rationalization (fewer, larger, more capable suppliers) Supply chain collaboration (for economic, social & environmental upgrading) Diversify: buyers, products, end markets Increased production for large domestic markets Full package production capabilities Technology investments (ITC, flexible production) Obtain certifications (quality, environmental, social) 18

19 2. Offshore Services and Upgrading in Developing Countries

20 The Size of the Offshore Services Industry (varied estimates) 300 Estimates of the Offshore Services Market Size BCG US$ 281,3 bill illions US$ bi NASSCOM US$ bill OECD US$ bill Year Industry growing & evolving rapidly Difficult to quantify the industry not accurate data & countries not recording these services New activities most dynamic not included, such are innovation Source: CGGC based on OECD 2008, NASSCOM 2009, Boston Consulting Group 2007, 20

21 Offshore Services Global Supply & Demand 2.1% Rest of the World 45% of the industry market 51.1% US & Canada 30.6% EU % Asia- Pacifi c Same number of call centers employees than India Demand for Offshore Services (%) Source: CGGC based on Everest & Datamonitor 21

22 Offshore Services Value Chain rce: CGGC Sour ¹ Vertical Activities- Industry specific: Each industry has its own value chain. Within each of these chains, there are associated services that can be offshored. This diagram captures the industries with the highest demand for offshore services. ² This graphical depiction of vertical activities does not imply value levels. Each industry may include ITO, BPO and advanced activities. 22

23 Mapping Selected Countries in the Offshore S Services i Value V l Chain Ch i 23

24 Offshore Services Upgrading: India, Philippines and Chile India 1990s 2010 Early 2000s Mid to late 2000s Philippines Early 2000 Mid 2000s Late 2000 Chile

25 Conclusions about Impact of the Economic Crisis on GVCs Global Value Chains: consolidation and resilience upgrading & downgrading Emerging economies (BICS): export platforms markets innovation Beyond export-oriented oriented industrialization: what s next? 25

26 North Carolina in the Global l Economy Linking Local Economies to Global Chains

27 Source: /NC_GlobalEconomy/index.shtml 27

28 Sunrise & Sunset Industries in N.C. Sunset: Textiles, Furniture, Tobacco Sunrise: Banking, Biotech, IT Avg. Wage per Employee Textiles $26,503 $31,943 $33,821 Furniture $24,969 $29,591 $29,798 Tobacco $53,503 $73,834 $70,756 Avg. Wage per Employee Banking $109,353 $109,299 $100,074 Biotech $59,229 $82,071 $87,155 Information Technology $58,258 $70,950 $77,027 NAICS product codes: Textile Mills (313); Furniture Mfg. (3371); Tobacco Mfg. (3122); Banks & Finance (523); Biotechnology (32541): Pharmaceutical & Medicine Mfg.; Information Technology (5415): Computer Systems Design & Related Services. Source: Employment Security Commission of North Carolina, 28

29 N.C. Employment Trends Textiles, Furniture, Tobacco 140 Banks, Biotech, & IT yment ('000s) Emplo Employ yment ('000s) Year Textile Mills (313) Furniture Manufacturing (3371) Tobacco Manufacturing (3122) Year Banks & Finance (523) Biotechnology (32541) Information Technology (5415) 29

30 North Carolina s Textiles/Apparel Industry North Carolina Employment in the Textile & Apparel Industries: ,000 Textile Mills: 313 Textile Product Mills: 314 Apparel Manufacturing: , ,000 NC Employment 120, ,000 80,000 60,000 40, ,000 0 Year 30 Source: NC-Global Economy Project (

31 Innovative Solutions: High-Tech h Textiles North Carolina firms and universities are working together to develop high-tech textiles, a new breed of technologyintensive textile products. These products use new, innovative materials and processes to create products with a wide array of uses Medical devices Construction materials Automotive industry High-performance sporting equipment Raleigh s North Carolina State University has taken the lead on this, and major firms like Freudenberg (German) and Nano-Tex (USA) are playing active roles. This sector tends to have fewer jobs, but jobs have higher pay and have greater productivity. 31

32 Strategic Solutions: Replacing Low Tech with High Tech Kannapolis: seeking to use private capital to transform an traditional textile center into an innovative biotech hub. Fall 2003: Pillow-Tex, a key plant in downtown Kannapolis, closes, laying off 5,000 workers. December 2004: Dole Foods owner David Murdock buys the plant. September 2005: Murdock announces that the site would be turned into the centerpiece of the North Carolina Research Campus, a 350- acre site that may include: Advanced laboratory space Offices and labs of more than 100 biotechnology companies Education and training center for biotechnology jobs Residential and retail space in downtown Kannapolis. Source: Carolina Newswire, 13 September 2005 ( viewone&id=3338&op=t) 32

33 Nova Scotia and Ocean Technologies GVC Analysis: Scope and Plan

34 Ocean Technologies & Nova Scotia Ocean technology sector Knowledge-based companies that invent, develop, and produce technological products for specific use in or on the ocean; or providing knowledge-intensive, technologybased services, unique to the ocean (as defined by NRC) SME-based; R&D-intensive Nova Scotia s ocean sector $5 billion or 15.5% 5% of provincial GDP Approximately 30,000 jobs Generated just under $1.6 billion in income in 2006 (about 6% of the provincial total) 34

35 Ocean Science and Offshore Energy are Prime Drivers Atlantic Canada Ocean Tech Suppliers by Ocean Industries Sector (%) Marine Recreation 1% Aquaculture Fisheries 3% 10% Marine Transportation 16% Education and Training 1% Ocean Observation and Science 29% Defence and Security 18% Offshore Energy 22% Source: 35

36 Scope of GVC Analysis Acoustics, sensors and instrumentation (e.g., echo sounders, sub-bottom profilers, and data acquisition and processing solutions) in: Marine defense GVCs Offshore extractive industry GVCs Finfish aquaculture GVCs Naval architecture technologies (e.g., unmanned vehicles, inshore vessels, and extreme climate vessels) in: Marine defense GVCs Offshore extractive industry GVCs 36

37 Ocean Tech: Global Landscape Major Clusters Canada (St. John s, Halifax, Rimouski, Vancouver); US (Woods Hole, Scripps Institute, Florida); Europe (Southampton, UK, Breast, France, Hamburg, Germany). Growth Prospect Sectors: offshore oil & gas (O&G); marine science; transportation; ROV s and ocean observation Markets: Central/South America, US, Asia (China & India) Challenges from Emerging Economies China & India will provide competition in OT and could become an influence in lowering price of products; They lack strength in R&D of new products, time, strategies, technology and clusters. 37

38 Research Objectives Identify the high value activities in ocean technology GVCs Find synergies between the high value activities and other portions of the ocean technology cluster Locate regional economies across the globe that specialize in these high value activities Highlight opportunities for Nova Scotia companies to move into higher value activities Provide recommendations to companies and government about promising upgrading trajectories 38

39 Research Plan Analyzing existing research data Local research data in Nova Scotia National data sources (e.g., Industry Canada) Global l trade databases (e.g., UNComtrade) Conducting firm interviews Key Nova Scotia firms in targeted research sectors Other local stakeholders (e.g., industry associations and government representatives) Interview global companies and industry experts to benchmark Nova Scotia Site visits: June and October

40 Thank you for your attention! Gary Gereffi, Director, CGGC Duke University Center on Globalization, Governance & Competitiveness 40