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New Balance’s voice heard on tariffs

Nike wanted an immediate end to tariffs on sneakers made overseas, but a gradual phaseout favored by New Balance seems likely to prevail

Eddy Maria Taveras used a hand-crank Singer sewing machine to make a repair on a running shoe at the New Balance factory in Lawrence.John Tlumacki/Globe Staff/Globe Staff

WASHINGTON — If they are still employed in future years, the New Balance factory workers who stitch fabric in Massachusetts and run sewing machines in Maine may owe their jobs to a hard-fought provision in one of the world’s biggest trade deals.

The Boston-based maker of athletic shoes appears poised to score a partial victory against American behemoths like Nike that want an immediate end to tariffs on sneakers manufactured overseas. Instead, after a long lobbying battle by New Balance, the trade pact is likely to impose a gradual phaseout of the tariffs.

New Balance says it wants a slower phaseout to help it preserve nearly 1,400 manufacturing jobs in New England.

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Negotiators have yet to finish the 12-nation pact, known as the Trans-Pacific Partnership, and have kept most details secret. Although any agreements could still unravel, the latest developments reveal how a privately owned New England company and its well-placed allies in Congress can wield surprising influence in a cutthroat industry dominated by global trade.

“The administration has heard our concerns and appears to be moving forward in a way to give us enough time to react,” said Matt LeBretton, vice president of public affairs for Brighton-based New Balance. Although officials have disclosed no timeframe for any elimination of tariffs, “we’re hopeful for the longest possible phaseout,” he said.

The shoe fight serves as one example of the extensive behind-the-scenes jockeying taking place in Washington as the administration seeks to win over hesitant lawmakers like Senator Angus King, a Maine Independent, and Senator Susan Collins, a Maine Republican. Both have lobbied to keep the protectionist tariffs in place.

It also highlights the intense competition between New Balance and rivals in the athletic footwear industry, where globalization’s effects are evident in the dearth of American shoe factories. New Balance, a century-old company owned by a former marathoner and his wife, is the only major athletic footwear business that still produces running shoes in the United States. But only about a quarter of the shoes New Balance sells in the United States come from its five New England factories. The rest are imported from Asian countries such as Vietnam, a member of the proposed Pacific trade accord.

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At the crux of the debate are tariffs on imported shoes that date back to the 1930s, when American footwear companies occupied bustling mill towns. Lawmakers intended to give US businesses a boost, but they turned into an impediment for the waves of shoe manufacturers who found cheaper labor abroad.

Tariff rates can stretch to 67.5 percent on shoes brought into the United States, and even on a cheap pair of $15 to $20 shoes can tack on another $5 or so. The United States imports about 98 percent of its shoes.

“There are practically no jobs in the US where manufacturing is prevalent when it comes to footwear,” said Matt Priest, president of the Footwear Distributors and Retailers of America, a Washington-based trade organization that supports the Pacific deal. “These are just costs baked in that consumers end up paying.”

Priest said the immediate elimination of tariffs would benefit consumers and most American companies, but acknowledged the challenges involved in pushing a deal through Congress. “We don’t want the perfect to be the enemy of good,” he said.

Above, the New Balance factory in Lawrence. The century-old company owned by a former marathoner and his wife is the only major athletic footwear business that still produces running shoes in the United States.John Tlumacki/Globe Staff/Globe Staff

When trade negotiations started to pick up, New Balance acted as the primary mover for the protections. The company rallied to keep the tariffs, cited the need to preserve domestic production, and drew lawmakers to its side.

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King held up the confirmation of US Trade Representative Michael Froman until Froman agreed to visit New Balance’s Maine factories. Collins coordinated meetings between company executives and administration officials. Senator Edward J. Markey, a Massachusetts Democrat, peppered the trade representative with letters. Michael Michaud, a former congressman from Maine, handed the president a pair of New Balance sneakers that were made in the state.

“This is a family-owned company that has made a conscious decision to maintain a substantial amount of manufacturing of athletic shoes in the US,” King said in a recent interview. “We should not whack them. We should reward them.”

But the company has softened its tone in recent months and could still stand to benefit. Tariffs that help its American factories also raise the cost of its numerous shoes made elsewhere.

“It’s a win for them on the imported side, since many of these shoes will be made in Asia,” said Matt Powell, a sports industry analyst at NPD Group, a New York market research company. “And it’s a partial win on the US side in that they will have a little more time to respond to change. What they will do then, I don’t know.”

New Balance, without elaborating on specifics, said a slower phaseout of the tariffs would give the company more time to plan and to adapt its business model.

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“Part of that is changing up in the factories what we do, how efficient we can be,” LeBretton said. “We look at what will allow us to make more in the US and not less.”

That is a promise that Nike, which has 12 times as many employees, has also made. The Oregon company vowed to create up to 10,000 American manufacturing and engineering jobs if the trade deal goes through. New Balance’s entire staff barely tops 4,000.

Obama recently visited Nike to sell the bill, a controversial move due to its past use of Asian sweatshops. (The company announced the job promise in conjunction with Obama’s trip.)

“It would have been nice for the president to come out and actually see people making shoes here and explain why [the deal] would be helpful for them,” said New Balance’s LeBretton.

Collins called Obama’s move “the height of irony, because Nike does not have a single domestic manufacturing job left in the US.”

But Obama, framed by a massive Nike logo, sought to emphasize how the country must confront a new set of global challenges and create standards for labor, the environment, and intellectual property before China determines those rules. China is not a member of the Pacific trade pact.

“This deal would strengthen our hand overseas by giving us the tools to open other markets to our goods and services and make sure they play by the fair rules we help write,” he said.

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Nike staff did not respond to requests for comment.

Trade agency officials say the final deal will ensure that all sides benefit.

“Made-in-America footwear manufacturers will find it easier to export,” said Trevor Kincaid, a spokesman for the US trade representative. “American footwear brands will enjoy new efficiencies and lower costs because of TPP.”

That is a tough selling point for skeptical lawmakers, many of whom Obama still needs to convince.

The House is expected to take up a bill next month that would grant the president greater authority, called “fast track,’’ to conclude negotiations. The actual trade pact would be brought before Congress later, once the negotiations are complete. Congress would not be permitted to amend the proposal.

When the Senate advanced the “fast track’’ legislation earlier in May, both King and Collins voted against it, even though the final trade bill may offer these protections.

“These are people’s lives in a small town where there are not other signs of economic activity,” King said, recollecting the trips he has taken to Maine’s bustling factories. “It’s the equivalent of General Motors closing in Detroit.”

Isali Ruiz formed running shoes on a mold at the New Balance manufacturing plant in Lawrence.John Tlumacki/Globe Staff

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Jessica Meyers can be reached at jessica.meyers@globe.com. Follow her
on Twitter @jessicameyers.