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Article: New Balance Wants Its Tariffs.

Nike Doesn't
by Eric Martin | May 3, 2012
For Brady Chapman, the answer to jump-starting the economy is simple: back the
companies that manufacture in America. Chapman and his wife own the Snack
Shack, a two-room restaurant in Skowhegan, a town of 8,500 set amid the maple and
pine trees of central Maine along a road locals call Moose Alley. New Balance Athletic
Shoe, the last major manufacturer of athletic footwear in the U.S., is the largest
employer in the area, where one factory after another has closed due to competition
from imports.

New Balance workers often stop by Snack Shack, especially on payday, for chicken
tenders and clam strips. Like many in the town, Chapman worries New Balances U.S.
factories will be put out of business by the proposed elimination of footwear tariffs
under a free-trade deal, dubbed the Trans-Pacific Partnership, that President Barack
Obama is negotiating with eight Pacific nations, including shoemaking colossus
Vietnam. If somehow these tariffs were not there, and you bring in all these imports,
theres no way they can compete, says Chapman. It would be devastating.

A continent away in Beaverton, Ore., sporting goods behemoth Nike is pushing for
elimination of the duties, pledging to create thousands of high-paying U.S. jobs, from
designers to product engineers. Nike draws support from business groups and home-
state lawmakers who say greater access to the Vietnamese market will provide
opportunities for U.S. engineering, architecture, and financial-services companies.
The question comes down to, is one kind of job more important than another? says
Erin Dobson, a Nike spokeswoman. What are the jobs for the 21st century? Theyre
not necessarily jobs that existed 30 years ago.

The debate shows how tricky trade issues are for Obama, who says he wants to
reward companies that manufacture in the U.S. and at the same time craft a
comprehensive free-trade agreement. Nobody should pretend that this is easy,
says Shaun Donnelly, a vice president of investment and financial services with the
U.S. Council for International Business. The Footwear Distributors and Retailers of
America, which wants an end to the trade barriers, says tariffs for some types of
shoes can run as high as 67.5 percent, and when the costs get passed on, they
effectively triple the price of foreign-made shoes. New Balance, based in Boston,
says the duties that help sustain its U.S. athletic footwear production are as high as
20 percent and asks that they be preserved.

The 7 million pairs of shoes New Balance produces each year in the U.S. make up
only a quarter of U.S. sales, says Matthew LeBretton, director of public affairs. The
rest are made in the U.K., China, Indonesia, and Vietnam. If this is purely a business
decision, then its very clear that you make more profit by making shoes in Asia than
in the United States, LeBretton says. We arent purists, but we are doing this for
reasons that are other than financial impact. Its the right thing for us to do. We
suffer as a country when we lose the ability to manufacture. He adds that producing
in the U.S. lets New Balance react faster to demand from U.S. stores and helps those
stores maintain lower inventory. The company also says local workers maintain
better quality control than workers abroad.
Keeping the tariffs is important because most of New Balances jobs are in
communities where there are few other options for employment, says Senator
Olympia Snowe (R-Me.). Theyre paying 46 an hour in Vietnam, and New Balance is
paying $10 an hour here, plus all the benefits, Snowe says. Its not a level playing
field. Our government has to finally wake up and understand that.

Nike has supporters, too. I really believe that the government should not negotiate
agreements for one company, says Matt Priest, president of the footwear
distributors association. Representative Earl Blumenauer (D-Ore.), whose district is
home to Nike employees and the U.S. headquarters of Adidas, says keeping the
tariffs taxes millions of consumers to keep a few thousand jobs.

Trade talks will continue this month. Maine lawmakers are applying pressure on the
administration to keep cuts in athletic footwear tariffs out of any final agreement.
The U.S. hasnt made any decision, says Carol Guthrie, a spokeswoman for Ron Kirk,
the U.S. Trade Representative, in an e-mail. Footwear is an area of interest for
Vietnam and remains a sensitive item for the U.S., Guthrie says. The challenge we
will face is how to address this product, and we continue to consult with Congress
and stakeholders on how to do so.