Impact of Tariffs on Footwear Industry in the US

INTERNATIONAL TRADE 1
International Trade
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INTERNATIONAL TRADE 2
Q1.
New Balance is concerned about the removal of tariffs as it has many suppliers based in
the U.S. that manufacture some of the parts it does not produce for instance the leather used in
particular shoes. Such suppliers have employed close to 7000 workers in the U.S. (Brodeur &
Van Assche, 2014). The factories located in small cities across the U.S. are essential to regional
economies, such as, a small center such as Maine has 8500 individuals and is ranked as the
largest employer in such an area. The presence of Maine boosts a variety of small businesses, for
instance, the restaurants. The future of such towns depends solely on the manufacturing activities
of New Balance in such towns.
The consultation gatherings with Froman, the representatives from New Balance, were
against tariffs reductions on imports from Vietnam. Based on the arguments from their
spokesperson, Matt, it was more than 25% expensive producing in the United States of America
in comparison to a country such as Vietnam (Brodeur & Van Assche, 2014). A reduction in tariff
would not only make production activities in Vietnam viable but also chop off the tariff
motivation that enables New Balance to produce in the U.S. This could make New Balance shut
down its factories in the U.S. and relocate its production facilities overseas where productions
costs were cheap. Thus, thousands of occupations would be lost, and contractors in the U.S
affiliated to New Balance would be hurt. Also, the small communities where the company
operated would be hurt economically.
Based on a report that was released in 2013, it was reported that Nike’s external
contractors had recruit ted more than 1 million workers in the 774 firms spread across the 42
nations. Vietnam led the list of countries that had most workers working for Nike where 310000
of its workers were tasked with producing apparel and sporting equipment (Brodeur & Van

INTERNATIONAL TRADE 3
Assche, 2014). China came second in the list with contractors employing 360000 and Indonesia
came third with only 75000 (Brodeur & Van Assche, 2014). It is estimated that three-quarters of
Nike’s international workforce originate from the above mentioned three countries. As opposed
to New Balance, Nike was a robust advocate of the motion to have the import tariffs reduced.
Nike’s defended its position by asserting that footwear manufacturers in the U.S. would be
relieved of the burden enabling them to save on manufacturing costs. Such savings would allow
Nike to re-invest in what is regarded as high-value-added occupations in the U.S. Nike also
revealed that being able to import footwear production with no penalties imposed in terms of
tariffs would be strategic in offsetting global labour and material costs which would have a ripple
effect of making footwear affordable to the consumers in the U.S.
It was apparent that after Doha global round of trade negotiations, the Trans-Pacific
Partnership would be the most fruitful trade liberalization intervention. The talks could
eventually turn out to deliver substantial benefits for the American economy. This is partly
because TPP was anticipated to deliver unprecedented access to markets for the American
enterprises particularly for key stakeholders in the Asia-Pacific region. The Asia-Pacific region
has been classified as the fasted growing territory globally. Thus, it would enable both the
consumers and importers to tap on the benefits such as broad and cheap access to commodities
from TPP nations.
However, Froman understands vividly that the TPP negotiations have to be carried out
carefully, with extreme care. Nevertheless, reducing trade barriers by the U.S. would exert more
pressure on the manufacturing industry in the U.S. that have been reported to frail. Although in
between 1999 and 2012, the total number of occupations in the U.S. had increased by more than
2%, the manufacturing occupations, on the other hand, had reduced by more than 30%. The