US non-committal on Japan’s footwear quotas – and on economic value of brands

The US Administration appeared profoundly underwhelmed in its October 28 reaction to worries about Japan’s Tariff Rate Quotas on footwear.

The reaction indicates a failure so far by US apparel and footwear lobbyists to convince its public and legislators that US brands matter to the US economy. A letter received on October 28 from US Trade Representative Michael Froman practically dismissed a Senator’s attempt to make the US Administration get Japan to drop the rule as part of Japan’s entry into the Trans Pacific Partnership

Japan operates a Tariff Rate Quota (TRQ) on imported leather footwear: punitive import duties – which can be as high as 300% – are imposed on all leather  footwear imports after the first 12 million (Japanese buy about a billion pairs of leather shoes a year). The  duties apply to everyone – including Japanese companies –  but US lobbyists persistently present the rules as some kind of anti-American bias.

There is, of course, virtually no leather footwear production in the US: Matt Priest, president of the Footwear Distributors and Retailers of America, said of US shoe factories “You can probably count them on your hands”. Japan’s TRQ hits US retailers and brands who want to sell the same Chinese or Vietnamese-made products they sell at home.

It makes far less sense for US businesses to manufacture in Japan for their tiny Japanese operations than it does for Japanese brands and retailers. So, just like British or Italian footwear brands, Americans feel damaged by Japan’s TRQ because for them, shoes designed in their home country, but manufactured in Asia, cannot compete in Japan with Japanese-produced shoes.

This has long annoyed US shoe brands: but they have struggled to get their case taken seriously by US trade negotiators, who realise there are serious political problems at home being seen to argue for easier access for Asian-made shoes. US apparel lobbyists claim to have an answer to that, arguing that there is a substantial benefit to the US economy from designers and merchandisers.

But they have failed even to find numbers to support their case, constantly relying on calculations that demonstrate the costs added in the US by retailers and wholesalers to import clothing sold to consumers in the US.

These numbers do nothing to counter the “commonsense” view that the economic value of designers and salesmen in a large, complex economy is marginal at best – or to persuade politicians that it is worth risking the ire of voters by adopting a policy many will see as fighting China’s corner for China.