[CTC] New Balance accuses Pentagon of reneging on sneaker deal

[Dolan, Mike]

"New Balance is reviving its fight against the trade deal, which would, in part, gradually phase out tariffs on shoes made in Vietnam. A loss of those tariffs, the company says, would make imports cheaper and jeopardize its factory jobs in New England."


New Balance accuses Pentagon of reneging on sneaker deal
Boston Globe
By Jon Chesto
April 12, 2016
http://www.bostonglobe.com/business/2016/04/11/new-balance-says-obama-administration-reneged-deal-involving-military-business/zUdUWa23ZWv53D5a9AjNII/story.html

New Balance is renewing its opposition to the far-reaching Pacific Rim trade deal, saying the Obama administration reneged on a promise to give the sneaker maker a fair shot at military business if it stopped bad-mouthing the agreement.

After several years of resistance to the Trans-Pacific Partnership, a pact aimed at making it easier to conduct trade among the United States and 11 other countries, the Boston company had gone quiet last year. New Balance officials say one big reason is that they were told the Department of Defense would give them serious consideration for a contract to outfit recruits with athletic shoes.

But no order has been placed, and New Balance officials say the Pentagon is intentionally delaying any purchase.

New Balance is reviving its fight against the trade deal, which would, in part, gradually phase out tariffs on shoes made in Vietnam. A loss of those tariffs, the company says, would make imports cheaper and jeopardize its factory jobs in New England.

The administration has made the pact a priority. It could be voted on by Congress later this year, though possibly not until after the November elections.

"We swallowed the poison pill that is TPP so we could have a chance to bid on these contracts," said Matt LeBretton, New Balance's vice president of public affairs. "We were assured this would be a top-down approach at the Department of Defense if we agreed to either support or remain neutral on TPP. [But] the chances of the Department of Defense buying shoes that are made in the USA are slim to none while Obama is president."

The administration says the issues of foreign tariffs and of whether the Pentagon should be required to buy shoes made domestically are entirely separate.

New Balance disagrees. Though most of the company's shoes are made overseas, domestic manufacturing is a big priority for owner Jim Davis, a longtime Republican donor.

A running shoe is brushed in a final step before boxing them in Lawrence.

The company employs about 1,400 people at its five New England factories - one in Brighton, one in Lawrence, and three in Maine. Company officials say they are looking to add workers to those plants, and they see a major military contract, with potentially as many as 200,000 shoe orders a year, as a way to help reach that goal.

Nearly every piece of gear that military recruits wear is made in the United States, per a 1940s-era law known as the Berry Amendment. But for many years, athletic shoes were exempt, largely because of a lack of sufficient domestic options.

Hoping to change that, New Balance and other companies worked toward making an all-American shoe. New Balance even purchased an expensive machine to make midsoles, a key component that was nearly always made overseas.

In 2014, the Pentagon relented. With competition among US manufacturers, officials said they were ready to consider domestically made shoes.

LeBretton said a representative for the Obama administration then asked New Balance to accept a compromise version of the trade deal, partly in exchange for a pledge of help getting the Department the Defense to expedite the purchase of US-made shoes.

But that help never arrived, LeBretton said. The agency still hasn't ordered any US-made sneakers.

The problem, according to the Department of Defense, is that none of the three New Balance shoes offered for consideration met the agency's cost requirements and one didn't meet durability standards.

The administration portrays the delay as quality and cost control. But New Balance sees it as foot-dragging, and as reason enough to revive its fight against the Trans-Pacific Partnership.

"The Department of Defense has basically played a shell game with domestic footwear manufacturers to protect the profits of their [base stores]," said LeBretton, who added that the company has offered to sell its shoes to the military with no retail markup. "They've put up roadblock after roadblock. Our shoes are ready to go. It's a bureaucracy run amok."

A spokesman for the Office of the US Trade Representative said the Obama administration supports New Balance's efforts to develop a shoe that's compliant with the Berry Amendment. He said it is a mistake for the company to use that issue as a reason not to support the separate trade accord.

"It is unfortunate that, despite a strong outcome in TPP that advances the interest of US footwear workers, New Balance now appears to be changing its position on TPP in response to the Pentagon's separate procurement process," spokesman Matt McAlvanah said in a statement.

New Balance's stance also drew criticism from the Footwear Distributors and Retailers of America, which argues that eliminating the Asia tariffs would be good for consumers and could allow US companies to invest more in domestic operations. "We would have loved to have had all duties eliminated on Day One," said Matt Priest, the group's president. "That's not what we got. We got a compromise."

But like New Balance, Representative Niki Tsongas is tired of waiting for the domestic shoe contract.

The Lowell Democrat is trying to include legislation in the next big defense spending bill that would ensure the department's purchase of US-made shoes for recruits. She is expected to have assistance from members of Maine's delegation.

Wolverine Worldwide, another company looking to build an all-US running shoe for the military, backs the Asia-Pacific deal and will also support Tsongas's legislation. Spokesman David Costello said Wolverine, whose Saucony brand is based in Lexington, is also frustrated by the delays. Landing a Pentagon contract, he said, could create a positive impact that would ripple throughout Wolverine's and New Balance's supply chains and support smaller companies that make components for the shoes.

Executives at New Balance recognize that they risk alienating a big potential customer by challenging the US government over the trade agreement.

But LeBretton said it's worth the gamble.

"We make a lot fewer shoes in the US than we do overseas, but the point is we're trying to make more here, not less," LeBretton said. "When agreements like this go into place, what that says to us is that our president and our trade negotiators, they don't want us to make more products here."




Michael F. Dolan, J.D.
Legislative Representative
International Brotherhood of Teamsters
Desk  202.624.6891
Fax    202.624.8973
Cell    202.437.2254

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