Domestic manufacturing is back in the limelight following President Joe Biden’s recently signed executive order meant to boost federal purchases of American-made products. As for the impact on the shoe industry, a lot still remains up in the air.
The directive, which aims to strengthen the country’s manufacturing sector, intends to raise local content requirements and revise the definition of “Made in the USA” products, as well as make it more difficult for federal agencies to purchase imported items.
“With this order, President Biden is ensuring that, when the federal government spends taxpayer dollars, they are spent on American made goods by American workers and with American-made component parts,” read a release yesterday from the White House. “This executive order fulfills President Biden’s promise to make ‘Buy American’ real and close loopholes that allow companies to offshore production and jobs while still qualifying for domestic preferences.”
However, some economists and trade group leaders have questioned the efficacy of (and have even surfaced risks associated with) such new policies. Some have indicated they believe the initiative may not only lead to higher costs for U.S. taxpayers, but also limit the variations of products available to consumers.
According to the Footwear Distributors and Retailers of America, U.S. shoe production is estimated at just roughly 25 million pairs every year — while 99% of all shoes sold in the U.S. are imported, with 2.5 billion pairs of shoes shipped to American shores in 2019. President and CEO Matt Priest explained that, in general, “Buy American” has a “limited impact on our industry — not a ton of pairs and/or applications where footwear is involved.”
That said, he added, “we typically oppose [‘Made in USA’ policies] for footwear as government employees and members of our Armed Forces prefer to have access to the full array of footwear available to them when accounting for imported shoes as well,” he added. “We simply don’t make enough quantities or all the needed types of footwear in the U.S. to fully support these provisions.”
The order, according to some economists, could even prove unlikely to bring home lost manufacturing jobs and could hurt the U.S.’s relationship with foreign trading partners — particularly economic allies such as Canada. Today, Canadian Prime Minister Justin Trudeau told reporters that his country would seek exemptions to the “Buy American” program.
“You export in order to import. When a country says it’s going to shut down imports, what they’re also going to do is shut down their exports. It’s a two-way street; that’s the inevitable, inescapable result of barriers to imports,” explained Dan Ciuriak, senior fellow at the Centre for International Governance Innovation. “When you intervene in supply chains, which is oftentimes complex, it is difficult to know what you’re ultimately achieving and what problems you’re putting up for producers and suppliers.”
What’s more, a score of American companies work with Canadian suppliers, who could be at risk of losing business depending on how such policies are executed and enforced.
“This is an example of the government trying to do something that is going to sound popular and create American jobs but is not attuned with the way the world works,” Ciuriak added, “and it’s likely to backfire than do something positive for the U.S. economy.”
But for some retailers, “Buy American” is welcome news. Over the past year, as the COVID-19 outbreak spread across the U.S., the economy fell into a recession and hundreds of thousands of businesses saw the closures of not only their offices and stores, but also their factories and other production facilities.
Tim Gibb, co-founder of flip-flop brand Tidal New York, which makes its product in a low-waste factory in New Rochelle, N.Y., said the executive order — despite impacting just federal contracts — brings more attention the plight of domestic manufacturers.
“To put a renewed focus on it by the Biden administration is really healthy,” Gibb said. “With the amount of unrest we’ve seen over the last couple quarters, the ‘made local’ conversation slightly hit the back burner, and it’s good to see it come back to the fore.”
Although labor in countries like China, Vietnam and Mexico generally remain less expensive than in the U.S., some experts have pointed out that the gap between the cost of manufacturing in such countries and America has been narrowing over the past several years. According to management consultancy Boston Consulting Group, Chinese manufacturing labor costs have been rising by 15.6% per year on average, while manufacturing labor costs in the U.S. have increased just 2.7% per year.
“People say it costs so much more to make products in the U.S., but that’s not true; we pay a living wage and sell our flip-flops at a competitive price,” Gibb said. “Our model was always based on this idea that we don’t need more cheap stuff. We need less high-quality stuff. That’s where the industry needs to go: Buy less and buy better.”
What’s more, as consumers grow increasingly socially and environmentally conscious, Sarah Irvani, CEO of comfort shoe brand Okabashi, said that keeping operations close to home could allow some companies to minimize overproduction and offer more transparency about sustainability to today’s ever-discerning customers.
“There’s a trend toward ‘fewer is better’ on the consumer side,” she said. “We’ve had to compete on the global scale for so long. When you look at the environment aspect of ‘Made in the USA,’ you can look across the product life cycle and see the sourcing, the carbon footprint [and] the use of the item. Domestic manufacturing is essential for circularity and end-of-life products.”
According to a study last year by advisory firm FTI Consulting, about 86% of Americans believe that the U.S. relies too heavily on foreign supply chains. If such viewpoints gain momentum and consumers begin to meaningfully shift their buying habits, Irvani suggests more companies could feel the pressure to reshore their businesses in response to demand.
“There’s been a lot of discussion in the government about how to support ‘Made in the USA,’ and that’s vital; there’s an opportunity to support American manufacturing in a meaningful way,” Irvani added. “It comes down to the pragmatic reasons and values. There’s been a realization of the different standards we have of an American-made product versus [overseas] where you might not have that same level of trust.” (Okabashi has been manufacturing its sandals in a factory in Buford, Ga., since 1984.)