It seems the USA currently has high tarrifs on shoe and sneaker imports even though we don't really have a shoe and sneaker making industry to protect. Who knew? But according to the DLC press release lauding the initiative, it'll cost the government $2 billion a year (this all via Mike Crowley) which seems to be of remarkably little concern to the erstwhile budget balancers over there.
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Wednesday Footwear Blogging
20 Jun 2007 05:14 pm
Comments (14)
They’re turning kids into slaves just to make cheaper sneakers
But what’s the real cost, cause the sneakers don’t seem that much cheaper?
-Flight of the Conchords, "Think About It, Think, Think"
Matt:
This post doesn't really make sense unless you explain what "the initiative" is.
Slightly less harshly, it makes sense if and only if you follow the first link.
I actually did a report on shoe manufacturing in college. They are all practically made in East Asia. However, this brings up an interesting point concerning a wasteful budget plan and continued failed plans. Compare: The Borgen Project states that our military budget this year is $522 billion and $340 billion has been spent in Iraq (it is estimated that we will spend in the trillions. On the other side of things, $19 billion annually can end world hunger and $23 billion annually reverses the spread of Malaria and AIDS. Those in charge of the budget really know what they're doing, right?
Here was a pretty tellign quote from the article:
"these tariffs are the single most regressive tax in the United States running from 8.5 percent for expensive Italian leather shoes to 48 percent for cheap sneakers."
Though I wonder just how much eliminating the tariff would lower show prices. It seems that they are priced at what the market will bear. Presumably the cost to produce Nike and Converse shoes is roughly the same, both brands are now owned by Nike, yet the Nike brand carries a 3-5x higher price tag, I suppose the cheaper brands where price matters would come down a little, but the marquee brands would just become even more profitable for Nike.
Does anyone understand what the point of this post was supposed to be? If just to draw attention to what seems like a completely reasonable policy initiative that's great, but it's a bit oblique for that. If to criticize, why? As for whether this will help poor people or not I don't know for sure but surely it won't hurt and it might help. When I was young and my family was poor buying shoes was a big deal. We were not close to going barefoot or anything but we did have to buy cheap crappy ones that fell apart quickly. Somewhat cheaper higher quality shoes would have a market and would be useful to poorer families.
New Balance makes running and cross-training shoes in the USA. There are also many fine US manufacturers of shoes and boots (Sebago shoes, Red Wing boots, Carolina boots, etc.). Shoes are still made in the U.S..
Call me crazy, but 2 billion a year doesn't sounds like it'll move the dial at all.
I spent a good deal of time earlier in my career designing shoes as well as setting up and overseeing the manufacture of them in countries throughout Asia. While it's true as "joejoejoe" says that there are some remnants of manufacturing still happening domestically, it would likely amount to a small fraction of 1% of the market. Asia dominates shoe manufacturing, although there has been an increase in Eastern European countries participating in the manufacture of fine leather footwear since the mid nineties (places like Romania). Contemporary athletic shoes though are made nearly exclusively in Asia.
The tariff structure on footwear is incredibly arcane and seemingly arbitrary. A lot of it is based on the type of material a shoe is made from, so a leather shoe pays a lower duty than a synthetic shoe. It's been too long for me to remember the percentages on each, but it was substantially different enough that the duty you paid on a synthetic upper shoe would wind up costing more than a full leather shoe by the time it was landed (providing both were FOB Hong Kong).
Without getting to wrapped up in the details, the tariffs are burdensome enough that they actually shape the way business is done, the way the supply chain runs, etc. Most development work happens in southern Taiwan, where a lot of the materials R&D is done. High tech athletics are manufactured in the southern provinces of the mainland (the major development area appears on the map as Shoe City), a big piece of the skateboarding shoe business is done in Korea, welt footwear (work boots and the like) are done at factories up north toward Mongolia. There are plenty of exceptions to those rules, but that's the general set up.
Plenty of product is actually pre-manufactured in China and then the final assembly is done in island territories so the Made In USA label can be affixed, so the fractional percentage of stuff that seems domestic may not be really.
The working conditions, factory set up, etc. varies pretty substantially by country (as you would imagine). While Chinese production lines are dominated by young people from the rural provinces living in dormitories on-site, in Korea factories lines are often populated by older women. Again there are exceptions, but i found things to trend that way.
All of that to say - the tariff structure is bizarre and unpredictable - not so much down the line regressive as a hodge podge of protectionism from a bygone era of industrial off-shoreing.
From a pricing perspective, when it comes to unbranded footwear, the wholesale cost is normally double the manufacturing cost + several dollars depending on the style. Retail mark-up can be along the same lines. So a skateboarding shoe with a leather upper that retails for $70 probably cost around $15 a pair landed. That includes the amortization of the tools used to manufacture the outsoles - if your tool cost have already been covered, your profits at wholesale are much higher - which is why most companies will do several uppers on each sole every season, and keep the soles around for a while.
When you are talking branded footwear, everything is pretty much the same, but you also have to amortize the cost of the marketing across the production run - and in the case of a lot of Nike footwear, endorsement payments. It's not unheard of that 50% of the retail price you are paying would cover the brand's cost of marketing the product to you. And of course there is a price premium associated with good design as well.
Too much information I'm sure....
If $2 billion in tax revenues is enough to justify tariffs, then we'll have tariffs for everything.
And I don't buy the hypocracy angle of this. Are the deficit hawks at the DLC really required to fight for every black dollar in the budget?
> Too much information I'm sure....
> Posted by Matthew | June 20, 2007 11:11 PM
You've been waiting for M.Y. to post about shoes for years now, haven't you? Today is your day!
I'm holding out for a computer science topic - preferably something related to C# programming.
I've put up with some stupid things here, but if anyone starts talking about C# I'm done. Just code like a normal geek or be banished to the the last level of hell built for C-sharp people.
It's somewhat tangential, but here's something I put together a few months ago about how not to buy tennis shoes made at a sweatshop . (hint: it's a trick question)
Comments closed July 04, 2007.
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Heads in the Sand
Money, it's gotta be the shoes!
Posted by mars blackmon | June 20, 2007 5:40 PM