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Lines Are Drawn in Debate on U.S. Tariffs


Cynthia Soriano knows the value of a dollar, which is why she shops at a big discount chain where she can pick up a pair of imported shoes for her 6-year-old daughter for $13.99. She doesn't know that $2 or $3 of that bargain-basement price supports a tariff system that critics say falls hardest on poor U.S. consumers and on developing countries that produce labor-intensive goods.

Those tariffs, designed to protect U.S. jobs by making imports more expensive, are the focus of efforts to influence the Bush administration's position on global trade.

Pressures on the administration to make changes are coming from several fronts. Recent studies question whether the tariffs save American jobs. Transformations in the U.S. economy have made many industries more dependent on imports and more unhappy with added costs from tariffs. Developing countries are becoming more critical of the U.S. for preaching open borders while maintaining steep barriers to protect domestic industries.

On the other side, some U.S. business interests, including some shoe companies, say tariffs are needed to keep their industries from being eliminated by foreign competition, raising the risk that Americans will lose the capability to make important products.

These arguments will influence the Bush administration as it develops its position in the next year or two during trade talks involving hundreds of countries.

Three decades of trade liberalization have lowered the average U.S. tariff to 1.6%. But the highest fees, ranging from 10% to 48%, are found on inexpensive consumer goods such as clothing, shoes and small household items whose production is concentrated in lower-wage countries. Those tariffs add up to about $20 billion a year.

Critics argue that tariffs have failed miserably in their original purpose: to protect U.S. jobs by making imports more expensive. The U.S. footwear industry, for example, has nearly vanished, with imports claiming 95% of the market. In 1968, U.S. footwear makers operated 1,200 domestic plants employing 250,000 people. Today, there are fewer than 40 companies employing 28,000 people, mostly in specialty items such as work boots.

"This is a case where policy was stuck in one era and the world has moved on without anyone really paying attention," said Edward Gresser, a trade expert at the Washington-based Progressive Policy Institute, who recently released a report on the subject. "Our tariff system was operating in a way that no one would want it to and it was getting huge amounts of money out of poor people while not protecting jobs."

But the U.S. tariff system may be about to become unstuck. This year, the American Apparel and Footwear Assn., whose members once represented the most vocal supporters of tariffs, split with other parts of the business community and called for an end to global tariffs in apparel and footwear.

"All my members have had to become importers to survive," said Fawn Evenson, vice president of global business and services for the Washington-based association. "They've shut down all their plants. They see tariffs as a tax on them."

The U.S. also faces growing pressure from advocates such as Oxfam International, which accuse the industrialized countries of preaching free trade while keeping tariffs high on industries, such as textiles, where cheap labor makes poor countries more competitive. In response to those complaints, the Bush administration agreed to consider eliminating such barriers on apparel and textiles in the latest round of global trade talks, which began in November and are scheduled to end in 2005.

This is far from a done deal, however, because these tariffs are backed by politically influential supporters. They are led by the American Textile Manufacturers Institute, the lobbying arm for the large domestic textile mills, and the Rubber and Plastic Footwear Manufacturers Assn., which represents New Balance Athletic Shoe Inc., one of the few remaining domestic makers of athletic shoes.

Any U.S. trade pact containing a tariff reduction would have to be approved by Congress, where Southern textile makers have successfully fought off attempts to weaken tariffs. "They can negotiate all they want, but Congress has to approve it," said Charles Bremer, vice president of international trade for the textile manufacturers' group.

There is more than just jobs at stake, argues New Balance Chairman and Chief Executive James Davis, whose Boston-based firm operates five factories in Massachusetts and Maine. He said the U.S. is at risk of becoming dangerously dependent on foreign goods unless it does a better job of supporting domestic manufacturers.

"What if we went to war with China?" he asked. "Where would we get our shoes?"

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