Shoe tariff debate hits close to home
photo/amber waterman
Patrick Welch, plant manager of New Balance's Skowhegan facility, says the Trans-Pacific Partnership free trade agreement would hurt the company's domestic manufacturing
Patrick Welch, plant manager of New Balance's four-story factory in Skowhegan, had ready answers for the two high-ranking Obama administration Com–merce Department officials visiting the facility on their June 7 fact-finding tour.
Size of work force? 880 workers overall in Maine, with 64 jobs added since January at the factories in Norridgewock and Skowhegan.
Efficiency in manufacturing? Turnaround time on shoe orders went from eight days to a little more than three hours by embracing "lean manufacturing" practices that reduce waste in both material costs and production time.
Skilled workers? The Skowhegan factory is able to seamlessly shift daily production among 14 different styles of shoes in a fast and direct response to market demands. Workers make that possible, he says, with their willingness to be cross-trained, giving him a deep pool of skilled craftspeople.
In a simple world, Welch's ready answers should be more than enough to persuade Paul Piquado, assistant U.S secretary for commerce for import administration, and Kim Glas, deputy assistant director for the office of textiles and apparel at the U.S. Department of Commerce, that New Balance and its workers are a shining example of the Obama administration's "Make it in America" mantra.
But Welch knows it's not a simple world. He's aware that the Trans-Pacific Partnership free trade talks between the United States and eight other Pacific-rim nations could negate all the efficiency improvements made in recent years. Among the issues being debated: eliminating the footwear tariffs now imposed on Vietnam, which has become, after China, the second-largest source of shoes imported into the United States.
"Obviously, the TPP free-trade agreement, if it were to pass with the tariffs eliminated, would negatively impact us," Welch says. "It would be one more hurdle we would need to jump. It would add insult to injury."
Trans-Pacific Partnership talks
Matt LeBretton, New Balance's director of public affairs, attended the 12th round of talks in Dallas last month and plans to be at the next round on July 2 in San Diego. "Things are heating up," he says. "Vietnam wants access to apparel and footwear markets in the U.S., even though, in terms of footwear, it's already the second largest exporter — and that's with the tariffs in place."
LeBretton says New Balance has asked the U.S. trade negotiators to retain tariffs on its core products and those made by other members of The Rubber and Plastic Footwear Manufacturers Association. Keeping those tariffs, he says, is consistent with the Obama administration's "Make it in America" manufacturing agenda and would allow the company to continue making at least 7 million shoes — or 25% of its domestic sales — in its New England factories each year.
Maine 2nd District Rep. Mike Michaud, a Democrat who's chairman of the House Trade Working Group, has been a vocal advocates of keeping the tariffs in place.
"The current tariffs have not limited options for consumers nor hurt other U.S. companies that maintain production overseas," Michaud wrote in a May 9 letter to U.S. Trade Representative Ron Kirk signed by 18 other members of the U.S. House of Representatives. "Indeed, the only discernible result of lifting import-sensitive duties in the Trans-Pacific Partnership would be the collapse of the domestic footwear industry. Conversely, there is no evidence whatsoever that eliminating the tariffs on sensitive footwear products will increase design and marketing jobs in the U.S."
Not surprisingly, given that its shoes are now made entirely overseas, Nike Inc., with world headquarters in Beaverton, Ore., begs to differ. Nike is planning to divest its Scarborough-based Cole Haan operation, which employs about 120, by June 2013.
As the world's largest seller of athletic footwear and apparel, with 903 factories in 48 countries, Nike has invested heavily in Vietnam, where it now employs 300,954 workers in 67 factories, according to the corporate website. Nike openly acknowledges on its website that it has "played a leadership role, along with other businesses and multilateral development organizations, in supporting infrastructure development in Vietnam" — namely improving roads and ports to lead to faster transport of its goods.
In a written response to Mainebiz's request for comment on the trade talks, Nike spokeswoman Erin Dobson makes a clear distinction as to who the job-winners will be if the shoe tariffs are lifted: "With the right TPP footwear and apparel rules, the United States can add high-value design, engineering, manufacturing technologies, marketing and digital jobs while providing U.S. consumers with more choice."
Absent from the list: making shoes.
Dobson doesn't cite New Balance by name but pointedly challenges its pro-tariff arguments: "The current system is set up to reward only a few companies based on an outdated system and clearly does not protect manufacturing jobs in the U.S. In fact, companies that manufacture or assemble footwear in the U.S. largely do this to enhance their brand image and to shorten their supply chains to react more quickly to consumer demands. Companies also cite the high-duty costs on their imported product as an impairment to their ability to invest in greater U.S. manufacturing."
"New Balance is a great corporate partner," counters Jeff Hewett, Skowhegan's economic and community development director. "I think we all realize they could make their shoes a lot cheaper in other parts of the world. We're hoping they can continue to reduce the cost of manufacturing and add even more jobs at the Skowhegan plant."
New Balance's Welch, who grew up in Readfield, sees the TPP tariff question as a matter of standing up for 800 footwear employees in Maine and hundreds more elsewhere in the U.S.
"If New Balance left central Maine, that would be 600-plus jobs gone," he says, referring to the plants in Skowhegan and Norridgewock. "Where would those workers go? There's nothing. I'm able to make a living here. I don't want to see it end."
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