Trade: Feeling the Pinch in Shoes

As a self-proclaimed free trader, President Nixon is plainly on the spot. His campaign commitment to protect the U.S. textile industry earned him Southern votes, but it also encouraged other industries to clamor for new barriers to imports. The line-up of supplicants now includes such diverse groups as steelmen, strawberry growers, carpet weavers, piano makers, beekeepers, glass producers.

Next to textile men, no other group has flexed as much political muscle as shoe manufacturers. By last week 303 members of the House had petitioned President Nixon for “voluntary” import restrictions on shoes. On a similar petition in the Senate, Republican Margaret Chase Smith of Maine gathered another 59 signatures, including those of Senators Edward Kennedy and Edmund Muskie.

Unique Penetration. Support for the trade-restricting measures cuts through geographic and party lines because shoe manufacturing is scattered across 40 states. It is a principal industry in New England and ranks high in Pennsylvania, Tennessee, Missouri, Arkansas, Ohio and North Carolina. Altogether, 253 Congressmen have shoe plants in their home districts, most of them located in small towns where they are vital to the local economy.

“The shoe industry,” says Congressman James A. Burke of Massachusetts, a chief promoter of curbs, “is seeking a reasonable solution such as quotas based on the 1968 import levels, perhaps allowing for a 5% increase per year.” Industry spokesmen claim that expanding imports of leather and vinyl shoes—mostly from Italy and Japan —have for years absorbed all the growth in the U.S. market. Since 1955, imports have risen from 8,000,000 pairs representing only a 1% share of the domestic market to last year’s 175 million pairs, or about 21% of the market. “No other industry that now enjoys import limitation or even the promise of import limitation can show market penetration of 21%,” says Senator Smith. “Seven plants closed in New England during the first four months of 1969 with imports cited as a major factor in each case.”

Scapegoats. For all those figures, there is considerable evidence that foreign producers are being cast as scapegoats by a domestic industry that is struggling with problems reaching far beyond import competition. The industry includes hundreds of small, lightly cap italized firms, and many plant closings are the result of mergers and acquisitions, not foreign competition.

Domestic manufacturers blame their troubles primarily on the gap between U.S. and foreign wages. In the U.S., wages and benefits for shoe workers average $2.75 an hour, compared with $1 in Italy, 560 in Spain, 580 in Japan and 480 in Taiwan. Labor is indeed a prime cost factor in an industry that has never been able to mechanize to any great extent. But price is not the only reason that the imports do so well. Craftsmanship and leadership in styling are equally valid explanations for the appeal of foreign shoes, particularly those from Italy, which account for 35% of the imports.

Ducking the Problem. Not all of the U.S.’s 700 shoe manufacturers are hurt by the imports. Melville Shoe Corp. has a plant in Spain, where it produces several types that are sold in its Thom McAn retail stores. Commerce Department officials believe that one-quarter of last year’s shoe imports were products of companies set up or backed by U.S. manufacturers.

Keenly aware of shoe manufacturers’ high-powered political support, the Nixon Administration is conducting an intense study of the industry’s case. In 1968, President Johnson ducked the problem by instructing the U.S. Tariff Commission to prepare a report; the document landed on Nixon’s desk in January. It predicts that, whether or not import competition becomes more intense, mergers and consolidations will continue because many of the small, family-owned companies simply cannot compete with the prosperous large manufacturers. Speaking of imports, the report concludes: “There is no concrete evidence of substantial injury to the domestic shoe industry.”