A New Balance employee works at the company's facility in Lawrence.

Credit: New Balance

New Balance Fights To Keep Tariffs On Imported Footwear

September 19, 2013

There’s a fight brewing nationally over footwear. As New England-based sneaker companies like New Balance and Saucony make their products here and overseas, they’re at odds over import taxes. And they’re taking their concerns to the federal government.

When it’s time to buy a new pair of sneakers, what do you think about? Comfort? Fit? Maybe you keep buying the same brand over and over again. But do you think about where your shoes are made?

Like in Lawrence, for example.

New Balance has a factory in a gigantic old mill building on the Merrimack River. On its open floor, 220 employees are hard at work cutting raw leather, heating up soles, stitching labels …

"Right now we should have made throughout the day 29 cases of shoes," said Brendan Melly, plant manager at the New Balance factory. "And we’ve made 29 cases, different styles, different colors.”

“It amazes me today how manual our process continues to be in terms of shoemaking and craftsmanship," Melly said. "And what most consumers don’t know — an average pair of 'Made in the USA' shoes that the customer’s wearing on their feet touches 32 different hands throughout the process.”

Thirty-two people: Is that a good thing? New Balance thinks so. That’s why the company is trying to convince the Obama administration to keep tariffs on imported footwear as the federal government negotiates a new free-trade deal with Pacific nations.

"One of the things we pride ourselves in is job creation and continuing to make things here in the United States, as the only athletic shoe manufacturer doing so," Melly said. "We have 1,300 manufacturing associates in the new England area in our five manufacturing plants.”

But New Balance is only one of many New England shoe companies. Converse, Adidas, Saucony, and others are urging Obama to get rid of import taxes on their shoes, which are made in foreign countries. They’ve sent a letter explaining that 99 percent of all shoes sold in the U.S. are already made overseas. And they claim that “excessively high” import taxes have made them unable to expand their teams of American shoe designers and distributors.

“Our industry is one of the highest taxed industries out there," said Matt Priest, president of the trade group Footwear Distributors and Retailers of America. "We paid $2.4 billion in duties last year.”

Priest is siding with the six companies, in favor of eliminating import taxes.

“We see this as an opportunity to lower that cost structure that impacts everything from hiring and creating jobs to advancement and innovation to lower cost for consumers,” Priest said.

But New Balance wants to grow, too, and it wants customers to care about where their shoes are made.

“We not only think that making shoes in the United States and keeping jobs here is the right thing to do, we think it’s a competitive advantage," Melly said. "We’re closer to our supplier base but also we think the products we make here have a quality and craftsmanship that is unsurpassed in our industry.”

But New Balance has taken advantage of innovation and cheaper labor overseas. At its plant in Boston, most of the work is done by robots.

Chris Monaco, supervisor at the Boston plant, says the upper parts of these walking shoes are made in China.

“The tag says Made in the USA of foreign and domestic materials,” Monaco said.

So there’s no guarantee that keeping the tariffs will prompt New Balance to hire more U.S. workers than machinery, for example. And footwear industry expert Marshal Cohen says it’s more likely that removing the tariffs will allow Adidas, Converse and Saucony to hire more designers.

“The majority of expansion for businesses in the U.S. – whether the product is made here or elsewhere – is going to come from the infrastructure rather than the production," Cohen said. "So as a company grows, they add people on their staff to help design the product, expand to new categories. Rarely do you hear them say we’re going to expand our production.”

The North American Free Trade Agreement has resulted in trends that the federal government will have to review as it renegotiates the Pacific Trade Agreement. Hal Sirkin of the Boston Consulting Group says it’s unlikely that we’ll see many shoes made in the U.S. in the near future, because shoes and clothing tend to cost more in labor than transportation.

“It’s more of a general trend," Sirkin said. "So for goods where the labor content is quite high, it doesn’t make sense to reshore to the U.S. Goods that are relatively low labor content and relatively high transportation costs, we’re seeing those reshore to the United States, or to Mexico.”

Some combination of humans and robots, onshore and off, appears to be the future of the shoe business — here in New England, and across the country.


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