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Giving Consumers the Boot

June 14, 1985

A year ago, the U.S. International Trade Commission unanimously rejected a claim by the domestic shoe industry that it was being unduly harmed by footwear imports. Now, under strong political pressure from Congress and with a liberalized legislative interpretation of what constitutes harm, the commission has reversed itself. On a 4-1 vote, it has called on President Reagan to impose quotas on shoe imports for the next five years. Adoption of this proposal would cost consumers plenty.

There is no doubt that the U.S. shoe industry is hurting. Americans walk their way through a billion pairs of new shoes each year, but a steadily rising number of those shoes are made abroad, most notably in Taiwan, South Korea, Italy, Spain and Brazil. In consequence, about 500 shoe factories have been shut down in this country since 1968, and tens of thousands of jobs have been eliminated. What's pinching American shoes manufacturers? It's a familiar story. Overseas labor costs are lower, manufacturing methods are more efficient, the strength of the dollar makes imports more attractive. As a result, foreign penetration of the American shoe market last year reached 71%.

That penetration included 575 million pairs of shoes with an import value of more than $2.50, the category on which the proposed quotas would apply. Under the ITC's recommendations imports would be cut back to 474 million pairs for each of the next two years. They would then be allowed to rise modestly for the next three years. The advertised purpose of this protectionism--and here too the story is familiar--is to give domestic manufacturers time to modernize their production and more readily compete with foreign suppliers.

But as with the U.S. auto industry, which in 1981 won similar protectionism against Japanese auto imports, that modernization effort in the shoe industry could only be paid for by consumers. The International Trade Commission staff has estimated that slapping limitations on imports would add $1.28 billion a year to the retail price of shoes. For that money, perhaps 26,000 jobs could be retained. Each of those jobs, in other words, would be subsidized by consumers at a cost of $49,800 a year per job. This in an industry where the average worker earns only about $14,000 a year.

There is no economic sense to this notion at all. Neither does it make sense to invite the kind of retaliation against American products that the European Economic Community has already threatened if shoe imports are restrained. The only certain results of this latest thrust toward protectionism would be that American consumers and the American economy both would be hurt. On those grounds alone President Reagan should reject the ITC's recommendations.

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