Tags: Financial Markets | Money | Unions | chinese | factory | main street | labor

Could High Tariffs Leave You Shoeless?

high cost of shoes when tariffs applied
(Nikolai Sorokin/Dreamstime)

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Monday, 09 September 2019 05:28 PM Current | Bio | Archive

Like many other college-educated Americans who live in cities on the coasts, I’m not a big fan of tariffs. As an economics student, I learned that these taxes on imports produce something called "deadweight loss," which, as the term suggests, is undesirable, an inefficient drag that benefits neither producers or consumers.

As a history student, I learned that the Smoot-Hawley Tariff that Herbert Hoover signed into law in 1930 worsened the Great Depression. As a consumer, I’ve appreciated the way that tariff reductions and free trade agreements negotiated in the past 30 years have meant easier, cheaper access to imported goods including Egyptian cotton, Mexican avocados, and made-in-China iPhones.

As an investor, I’m annoyed by the way the stock market seems to go down every time the Trump administration announces plans to impose new tariffs on goods from China, and I respect the market’s judgment in boosting stock prices every time it seems like the tariffs will be lifted. As a taxpayer who realizes that a tariff is a tax, I’d prefer that the money stay in the pockets of Americans to save, spend, or invest rather than be sent to Washington for spending by politicians.

And as a believer in the skill, ingenuity, and work ethic of Americans, I think our companies can succeed in the global economy without the benefit of a tariff artificially protecting us from competition.

Even so, though, I can’t escape the feeling that the current widely shared elite contempt for the Trump tariffs is driven by a failure to consider fully some significant aspects of the story.

Two recent articles in The New York Times, both involving footwear manufacturing, are examples.

The Sept. 1 Times featured a dispatch from Dongguan, China, about a factory there that makes leather cowboy boots that are sold in America. Absent from the article is any information about the working conditions at the factory. How much do the employees get paid? How many hours a week do they work? What would happen to them if they wanted to form an independent labor union to bargain collectively for higher wages?

How do all of those things compare to conditions at factories in the United States?

The Sept. 3 New York Times carried an article on the front of its business section about a Colorado-based company, Xero Shoes, that designs and markets shoes and sandals that are made in Asia. That article, too, displays a disappointing lack of curiosity about conditions at the China-based factory where the firm’s shoes are made.

This Times article, too, doesn’t report how much money those workers get paid, how many hours a week they work, or what would happen to the shoemakers if they wanted to organize an independent labor union.

The Times article leaves readers with the impression that manufacturing shoes in America is somehow impossible, paraphrasing the business’s co-founder as saying "the United States presents no viable options" and quoting an "international trade expert," Chad P. Brown of the Peterson Institute for International Economics, insisting that "it’s hard to imagine" the manufacture of shoes and clothing returning to the United States.

Yet this isn’t really so difficult to imagine or envision at all.

In a non-imaginary reality, employees of Red Wing Shoes make more than 1.2 million pairs of shoes a year in American factories, including one in Red Wing, Minnesota. L.L. Bean makes its boots in Brunswick, Maine. New Balance says it makes or assembles more than 4 million pairs of athletic footwear a year in the U.S. at five facilities in Maine and Massachusetts. Bates makes boots for military and civilian use at a factory in Big Rapids, Michigan.

Some of these products cost more than made-in-China shoes, but they also may be higher quality. An NPR piece in June estimated the cost of shoemaking labor in China at $3 an hour versus $16 an hour in the U.S.

In capitalism we like to leave these choices — pay a little more for a more durable shoe made under more humane work conditions, or pay a little less for a flimsier shoe made under more cruel conditions — up to individual consumers.

But there are players in this drama other than shoe-shoppers and the tariff-threatening President Trump. When the Chinese Communist government hauls away some would-be union organizer to be tried on criminal charges in a legal system without genuine due process, that’s a kind of government intervention just as heavy handed as a tariff.

Yet somehow one hears fewer complaints about it in the American press, whose correspondents in China operate with Chinese-government-issued press credentials.

When an American shoe or textile factory closes in some Minnesota, Michigan, Maine, or Massachusetts mill town, there’s a spillover effect — empty storefronts on main street, children with newly jobless parents, another patch of territory lost to the opioid epidemic.

Some claim that under the economic theory of comparative advantage, the United States should cede shoe manufacturing to low-wage Asia in the same way that we might cede coffee-bean-growing to Java, Ethiopia, and Nicaragua.

But there’s nothing in the U.S. climate or soil that makes it inherently inhospitable to manufacturing — nothing other than a rule of law protecting employees and the environment that is absent in some other places.

A lot of Democratic politicians, and certainly voters, grasp this, which is why few of them have seized the otherwise inviting opportunity to turn the Trump tariffs into a major campaign issue.

That’s not to say that high tariffs are always appropriate or desirable.

Free trade between free countries is the ultimate ideal. American labor and environmental law might even benefit from some reforms to make complying with it less costly for manufacturers.

Today’s trade and tariff story, though, is a lot more complicated than merely mourning a Trump tariff’s effects on the stock market or on American businesses or consumers that rely on Chinese-made goods.

Ira Stoll is author of "J.F.K. Conservative," and "Samuel Adams: A Life." Read more reports from Ira Stoll — Click Here Now.

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Ira-Stoll
When an American shoe or textile factory closes in some Minnesota, Michigan, Maine, or Massachusetts mill town, there’s a spillover effect, empty storefronts on main street, children with newly jobless parents, another patch of territory lost to the opioid epidemic.
chinese, factory, main street, labor
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2019-28-09
Monday, 09 September 2019 05:28 PM
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