USITC Report Confirms Trans-Pacific Partnership A Big Footwear Win

Footwear has a new card to play in the debate for the Trans-Pacific Partnership passage. In one of the most anticipated economic analyses of the trade agreement, the U.S. International Trade Commission released its report Wednesday, highlighting footwear as one of the clear winners.

According to the commission, the U.S. would see an increase in imports from TPP nations by $1.6 billion, or 23.4 percent. The majority of that import increase would come from Vietnam, and at the expense of China, which would see U.S. footwear imports fall by more than $400 million, or 1.3 percent, under TPP.

U.S. shoe exports to TPP member nations would rise $135 million, or 23.6 percent. The majority of exports would result from a $125 million, or 76.5 percent increase, in U.S. footwear parts sent to Vietnam.

Matt Priest, president of the Footwear Distributors and Retailers of America (FDRA), said perhaps the most important aspect of the report is giving momentum to the free-trade proponents who have taken a beating in recent weeks thanks to loud protests and negative presidential campaign rhetoric.

“In a broader context, it really starts the clock to say, ‘Let’s look at this together and find a path forward,’ ” said Priest. “I think it will help those of us advocating for free trade to point to an independent report and body.”

Presidential Candidates
Bernie Sanders, Hillary Clinton & Donald Trump.
CREDIT: REX Shutterstock.

One of the other key points from the report was that U.S.-manufactured footwear would not be negatively impacted by the influx of imports. According to the estimates by the report, U.S.-made footwear would grow about half a percent, thanks in part to the Japanese tariff reduction and new market access. Brands have been eager to bring manufacturing stateside, too, should the deal be approved. Nike last year promised to bring manufacturing back to the U.S. with 10,000 new jobs on TPP passage. Wolverine Worldwide has also started expanding its presence in Vietnam and investing further in its Michigan facilities to prepare for the growth in the industry.

New Balance is less enthusiastic and called the TPP a bad deal for its athletic styles created in New England. “From the moment TPP started to be contemplated, we were skeptical and nervous and had some concerns,” Matt LeBretton, VP of public affairs at New Balance told FN in April. “We knew … the tariffs that help us maintain our domestic workforce would be squarely in the targets.”

While footwear stands to gain significantly from the deal, it is not the case for all industries. Overall, the report offers modest gains for the U.S. economy. GDP is expected to grow by $42.7 billion, or 0.15 percent, by 2032 once member countries implement most of the tariff reductions.

What the report means for the overall passage is complicated. Footwear brands will have to do some significant maneuvering to highlight the benefits of the agreement of the deal against some major industries including autos and medical devices.  The tariff reduction, increased expectation for innovation and shoe quality and diversified supply chains outside of China are key stories for footwear’s support of TPP.

President Obama meets with TPP trade leaders in October 2015
President Obama meets with TPP trade leaders in October 2015
CREDIT: REX Shutterstock.

“We hope, and we think what will happen, is that instead of making less-expensive shoes that hopefully the designer finally gets his way and gets to put the leather or the synthetic that they wanted, instead of compromising on something else to get it in a certain price point,” said Rack Room Shoes CEO and president Mark Lardie.

Senate Majority Leader Mitch McConnell has signaled he is unwilling to bring the deal up as it would likely jeopardize some senators up for re-election, specifically in Illinois, Pennsylvania and Ohio. Speaker of the House Paul Ryan has also backed away from his vocal TPP support. Even now it looks like supporters are targeting the lame-duck session for a vote.

“It’s a really tough environment right now for us to try and convince people that this is good for America,” said Rep. Dave Reichert at an FDRA meeting this week. He serves as the chairman of the House Ways and Means subcommittee on trade. “Bottom line is we are in a global economy,” he said. “You can’t turn the clock back. So what’s the choice? The choice is for us to be leaders.”

The rhetoric from the campaign trail is certainly not helping the mood either. Both Donald Trump and Bernie Sanders both called the agreement a no-go. Even Hillary Clinton, who served as Secretary of State during negotiations, called the agreement “horrible.”

The fight is far from over to get the deal done with the current atmosphere. “We again urge Congress and the administration to work together so that the TPP can be considered, approved and entered into force as soon as possible,” said Rick Helfenbein, president & CEO, American Apparel & Footwear Association. “Every one-year delay will cost our industry more than a billion dollars in lost duty savings, and that’s not a pretty number.”

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