By Pam Barker | TLB staff writer
New Balance, a longtime US shoe manufacturer and vocal critic of the TPP, has valiantly tried to maintain some of its production in the US (up to 25%) despite years of being in competition with the likes of Nike’s low-cost high-profit offshore production. But it’s had enough with the Obama administration’s underhand, having-it-both-ways approach to negotiating for the TPP.
The TPP, or trade agreement with Asian and Pacific Rim countries, not only obliges companies like New Balance to shift manufacturing to Asian countries, where hourly labor rates can fall below a dollar an hour, but also removes existing tariffs on goods coming into the country. So if such companies were somehow to retain their US manufacturing base, they likely wouldn’t be able to last very long under such an imbalanced price landscape.
The TPP therefore isn’t attractive to companies like New Balance, unless the President comes calling to do let’s-make-a-deal. ‘New Balance says the government offered the company [a] contract if it would keep quiet about what TPP would do to domestic manufacturers.’ Problem is, the administration then broke its promise, which has New Balance speaking out, something it wasn’t supposed to do.
Enjoy Dave Johnson‘s concise and to-the-point report on this. It’s not a story that makes companies like New Balance smell fresh and fragrant exactly, but it’s an interesting look at the way the government works to serve its true master, the big corporations, as it attempts – in secret, of course – to remove much-needed employment opportunities for its own people. Johnson also enlarges our understanding of how maliciously and cynically these so-called ‘free trade’ deals come into existence.
I also recommend Johnson’s other article, from May 2015, referenced below, entitled Obama to visit Nike to promote the TPP. Wait, NIKE? Really? which explains, among other things, how corporations like Nike are handed a tax-free silver platter at the American citizen’s expense.
By Dave Johnson
Last year President Obama went to Nike headquarters to promote the Trans-Pacific Partnership (TPP). But Nike doesn’t make shoes in the US, and TPP would force companies like New Balance to stop making shoes here. New Balance kept quiet about this, but now says the administration offered the company a big contract in exchange for its silence. New Balance is talking now, because the contract never came through.
A Contract In Exchange For Silence?
The Bangor Daily News has a big story this week, “New Balance claims Defense Department strung it along on military sneaker contract”:
New Balance officials say they’ve broken their silence over the Trans-Pacific Partnership because the Obama administration has failed to offer the company a chance for a contract to sell sneakers to the military.
… New Balance held its tongue about the TPP for nearly a year, he says, because federal officials told the company that if it did so, New Balance would get a shot at a military contract.
This is a very big deal.
Last May’s post, “Obama To Visit Nike To Promote the TPP. Wait, NIKE? Really?”, explained what TPP means for the domestic shoe industry:
While the President visits Nike, New Balance is struggling to be able to keep some of its manufacturing in the U.S. Currently New Balance makes shoes in five factories in the U.S. Their executives say if TPP passes, lower tariffs on shoes made in places like Vietnam will force them to close their U.S. factories.
… If the President gets his way and TPP passes, the tariff on non-U.S.-made (Vietnam) shoes will end and New Balance – like so many other companies struggling to manufacture inside the U.S. – will have no choice but to end its U.S. manufacturing operations. Meanwhile Nike, already manufacturing in Vietnam and Malaysia and currently selling shoes that cost $10 to make for over $100, will gain even more of an advantage, which obviously will not be passed on to consumers. If you are able to get a certain price for a product, why reduce it?
This is just one example of how even more American workers would lose their jobs if TPP passes.
TPP would lower tariffs on shoes (and everything else) coming into the country from low-wage TPP countries. Companies like Nike would be rewarded for closing factories here in the past. Companies like New Balance would be forced to close factories here in the future.
New Balance says the government offered the company this contract if it would keep quiet about what TPP would do to domestic manufacturers. The military buys a lot of sneakers — as many as 200,000 pairs each year. It currently buys non-US-made sneakers, in spite of rules saying they should buy US-sourced when possible. So New Balance should have this contract anyway. (TPP would prohibit us from requiring the purchase of US-made goods with our own tax dollars.) But the government apparently used the promise of the contract to buy the company’s silence about the job-killing effect if TPP passes.
The Boston Globe has more on this, in “New Balance accuses Pentagon of reneging on sneaker deal”:
New Balance is renewing its opposition to the far-reaching Pacific Rim trade deal, saying the Obama administration reneged on a promise to give the sneaker maker a fair shot at military business if it stopped bad-mouthing the agreement.
After several years of resistance to the Trans-Pacific Partnership, a pact aimed at making it easier to conduct trade among the United States and 11 other countries, the Boston company had gone quiet last year. New Balance officials say one big reason is that they were told the Department of Defense would give them serious consideration for a contract to outfit recruits with athletic shoes.
… “We swallowed the poison pill that is TPP so we could have a chance to bid on these contracts,” said Matt LeBretton, New Balance’s vice president of public affairs. “We were assured this would be a top-down approach at the Department of Defense if we agreed to either support or remain neutral on TPP.
The government offered a lucrative contract to a company, to keep quiet and not alert the public to the potential job-losses from TPP. Just, wow.
This story raises the question of what else the administration is doing to get TPP through, and why. For example, last year the “Fast Track” Trade Promotion Authority bill prohibited the administration from entering into “trade” agreements like TPP with countries that violate human rights, in particular human trafficking. Malaysia violates human rights by enabling human trafficking. Malaysia is a TPP country.
So the administration solved the problem by declaring that Malaysia doesn’t do that after all, even though they do.
Last year’s post “Obama Administration Makes Malaysia Slavery Problem For TPP Disappear” explains:
[T]he trade promotion authority law … prohibits the U.S. from entering into “trade” agreements with “tier 3” human-trafficking countries.
According to news reports, the Obama administration found an easy – and extremely cynical – fix: just change Malaysia’s rating to a “tier 2.” Problem solved. But human rights groups, labor and members of Congress are “outraged,” “shocked” and “deeply disturbed.”
… Human trafficking? Slavery? Sex slaves? People kept in cages? Mass graves? Abuse of workers? No problem. Just tell the State Department to ignore it.
Another post, “Did Obama Administration Downplay Malaysia Slavery To Grease Trade Deal?”, elaborates,
Cheap labor is the whole point of our corporate-rigged, NAFTA-style trade agreements. Companies get to move jobs, factories, even entire industries out of the U.S. to countries where people are exploited, the environment is not protected and “costs” like human safety are kept low.
But even so … tolerating slavery? Flat-out slavery? Really? Unfortunately, it looks like that’s what is happening with fast-track trade promotion authority, The Trans-Pacific Partnership (TPP) and the Obama administration.
… Malaysia was a Tier 3 country in the 2014 TIP report. The 2015 TIP report was supposed to be released in June but was delayed coincident with the passage of fast-track legislation with the slavery clause. The report was released Monday, and changes Malaysia’s TIP rating from the worst “Tier 3” to a “Tier 2,″ even though there is little or no change in Malaysia’s actual performance.
Promising a company a big military contract if they would keep quiet about the job-killing effects of TPP? Letting a country off the hook for actual slavery?
The TPP is all about pushing jobs out of the country in search of lower wages so executives and shareholders can pocket that wage differential. But slavery? Really? Contracts for silence about how it will close US factories? Really?
What else is going on to push this corporate-favoring “trade” agreement?
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About the author
Dave Johnson is a contributing blogger for the Campaign for America’s Future.
About the contributor
Pam Barker is a TLB staff writer/analyst. She has an extensive background in the educational system of several countries at the college and university level as a teacher and administrator