A trade agreement and Maine jobs
By U.S. Rep. Mike Michaud
(D-Maine)
Sometimes the impacts of global trade seem abstract, but not when you or your neighbor has been impacted by a lost job or reduced hours due to unfair foreign competition.
Unfortunately, the Obama Administration may be pursuing another major trade agreement that could hurt Maine workers. But it doesn’t have to be that way.
A new trade agreement called the Trans-Pacific Partnership (TPP) is currently being negotiated among the United States and Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, and Vietnam. And it has the potential to severely impact Maine jobs in our footwear industry.
That’s why I recently wrote a letter signed by my Maine and Massachusetts colleagues urging the U.S. Trade Representative (USTR) to ensure that TPP does not undermine the American footwear industry. I did this because New Balance, which holds the distinction as the only athletic shoe company that currently manufactures footwear in the U.S., could be adversely impacted by the current TPP negotiations, especially as they relate to Vietnam.
New Balance has over 800 employees at their Maine facilities in Skowhegan, Norridgewock, and Norway, and hundreds more in Massachusetts. I visited the company’s Skowhegan facility last month on my “Make it in Maine” tour of Maine manufacturers and one of the chief concerns the company had was the impact of U.S. trade policy on their domestic business. And it’s no wonder when you look back at what has happened to our domestic industry.
The U.S. footwear industry has declined sharply in the last 25 years as companies have shifted shoe production off-shore, taking with them tens of thousands of American jobs. Between 1999 and 2007 alone, domestic production fell by nearly 75 percent. This decrease of production has led to the closure of footwear manufacturing facilities and the significant loss of manufacturing jobs. Since 1997, more than 28,000 American jobs in the footwear manufacturing sector have been lost, a decline of nearly 65 percent.
The industry’s decline is a direct result of growing foreign imports, which increasingly include footwear from Vietnam, one of the very countries currently in the mix when it comes to the TPP trade agreement. In 1998, shoes from Vietnam represented less than one percent of American imports and the eighth largest U.S. source of foreign shoes. By 2007, that number had jumped to more than five percent, and Vietnam had become the second largest source of shoe imports to the U.S. A trade agreement like TPP that includes Vietnam, and that does not adequately protect domestic footwear manufacturers, will only accelerate this trend.
The outsourcing of this once-strong, domestic industry is directly attributable to the lack of adequate labor rights and standards in countries such as Vietnam and China. According to industry analysis, wages are the second largest expense in footwear production and account for 18.3 percent of U.S. footwear manufacturing costs. With wages in Vietnam that are eight percent of those in the U.S., it is easy to see why domestic footwear manufacturers find it hard to compete, regardless of rising worker productivity. The relentless pursuit of lower wages also explains why some companies are moving their facilities from China to Vietnam. For example, Nike, the largest seller of athletic footwear and apparel in the world, reported for the first time in 2010 that the greatest percentage of its footwear production occurred in Vietnam, not China.
Given Vietnam’s rise in the global footwear industry, TPP has significant implications for the import-sensitive domestic footwear industry. Current domestic tariff rates on imported footwear provide some countervailing measures against the intolerable foreign labor conditions that have allowed foreign manufacturers to undercut the domestic footwear producers. Higher duties help to level the playing field against Vietnam’s state-owned enterprises and currency intervention policies. They also reduce the likelihood that China would transship underpriced footwear product through Vietnam to the U.S. If the TPP agreement removed, reduced, or phased out these tariffs, the remaining U.S. footwear producers would be unable to compete against footwear companies in Vietnam, and American jobs would be lost.
If TPP lowers U.S. footwear duties, the remaining American shoe manufacturers will be forced to close their doors and lay off over 1,000 American workers. This can’t be allowed to happen. The footwear industry has been gutted by foreign imports, and our trade negotiators need to make sure that this trade deal doesn’t off-shore what’s left of our shoe manufacturers. They must do whatever they can to avoid the mistakes of the past and protect American jobs.