New Balance is taking a stand against the Trans-Pacific Partnership. After remaining neutral on the controversial trade deal, the Boston-based athletic brand announced today it was changing its position.
In a conversation with Footwear News, the company said fundamentally it was anti-TPP because the deal would be bad for U.S. footwear manufacturing and jobs, as well as threatening New Balance’s lead as a top domestic athletic-shoe manufacturer.
“From the moment TPP started to be contemplated, we were skeptical and nervous and had some concerns,” said Matt LeBretton, VP of public affairs at New Balance. “We knew … the tariffs that help us maintain our domestic workforce would be squarely in the targets.”
Generally the footwear and fashion industries have been big TPP supporters, arguing the agreement opens markets for U.S. goods and that it will help lower prices for the consumer. The Footwear Distributors and Retailers of America expect the deal will save about $6 billion in tariffs in its first decade.
According to LeBretton, New Balance specifically took issue with tariff reductions on footwear, which were implemented at a much faster pace than expected. He also said he had concerns over the enforcement provisions in the deal.
Up until this point, LeBretton said New Balance has remained quiet on the TPP because the company had a handshake agreement with the Office of the United States Trade Representative. The company said in exchange for being neutral on the deal, the USTR would help support New Balance’s efforts to get the Berry Amendment extended to athletic footwear and set up a meeting with the Department of Defense for the brand.
Since the 1940s, the Berry Amendment has required that military uniforms to be made in the U.S., although sneakers and athletic footwear have remained outside of the regulation.
“The Berry Amendment was our offensive measure for us and our factories,” said LeBretton. “We spent millions in machinery equipment and training and trying to get the program moving along. We’re in the second design of a Berry-compliant shoe. Our time and energy could have been going to something that could have bared fruit.”
Critics of New Balance’s position are quick to challenge the brand’s decision to come out against the deal, citing that nowhere in the agreement is the U.S. military footwear issue even addressed.
“It’s surprising and disappointing to have them to move neutral to opposition,” said Matt Priest, president of the FDRA. “We see these as two different issues: What the U.S. military procurement issues are is totally separate to what our U.S. government trade policy should be. To hold TPP hostage in hopes of getting something solved in a totally different arena is shortsighted.”
But New Balance says it matters because a lower tariff rate on imported shoes — especially from the fastest growing footwear exporter Vietnam — will hurt its domestic business, which is based in Massachusetts and Maine.
The move today also puts the athletic player in a tough position as an outsider on the issue in its own industry.
In March, executives at Wolverine World Wide, Elan Polo, Lacrosse Footwear and H.H. Brown (which all produce shoes at home and abroad) signed a letter endorsing TPP.
The American Apparel and Footwear Association also reiterated its support of both the Berry Amendment and TPP today. (New Balance president and CEO Rob DeMartini is the chairman of the board.)
“TPP will provide opportunities for our members to reduce costs, stay competitive, and enter new markets,” said Rick Helfenbein, president and CEO of AAFA. “Even a one-year delay in the implementation of TPP will cost our industry a billion dollars in lost savings.”
Just as Ford and Patagonia have come out against the deal, Nike and Gap have supported it. And New Balance says even if it does get its Department of Defense deal, it’s not going to be quiet on TPP.
“We’re going to have what is an effective and loud presence in D.C. explaining our case,” said LeBretton. “If you look in the coalition that is against TPP, there are some outliers in big business in there. There’s Ford. There’s New Balance. These are iconic American companies saying TPP needs to be fixed or done [away] with.”