Proponents of “Affordable Footwear Act” seek traction for legislation

By: | at 08:00 PM | Channel(s): International Trade  

An ill-conceived tariff on imported shoes was cobbled together during the Great Depression. While much has changed in the ensuing seven decades, strangely, the shoe tariff is still being paid today. Will that change?By George Lauriat, AJOTOctober 29th 1929, the day of the Great Wall Street Crash is often cited as the beginning of the Great Depression of the 1930s. Less than a year later, Congress passed the Smoot-Hawley Tariff Act, which raised duties on a wide variety of imports. Originally the act was design to protect farmers from foreign agricultural imports. But like most legislation, Smoot-Hawley acquired a life of its own and the tariff was extended to protect the shoe industry. Since then economists have sometimes blamed the Smoot-Hawley Tariff Act for pushing the US into depression by raising trade barriers which trading partners felt obligated to match. Whether the act actually caused the depression is arguable, but the protectionist measures surely didn’t help alleviate the economic woes.
In the ensuing decades the US and other nations have sought to reduce trade barriers, but the “Shoe Tax” has lived on.
In 2007 the “Affordable Footwear Act” was introduced (H.R. 3934) to reduce tariffs on imported shoes. The AAFA (American Apparel & Footwear Association), the major industry proponent of the legislation, rightly pointed out in their position paper that 99% of all footwear sold in the US is imported, and US footwear firms paid $1.7 billion in duties in 2008. The AAFA and others in the Affordable Footwear Initiative coalition [NRF (National Retail Federation), FDRA (Footwear Distributors and Retailers of America), RILA, (Retail Industry Leaders Association), and OIA, (Outdoor Industry Association)] sought in the legislation to target the “lower-to-moderately-priced and children’s footwear.” However, failure to pass the legislation meant back to the drawing board.
NEW LEGISLATION
On March 26th the legislation was re-introduced by Senators Maria Cantwell (D-WA) and John Ensign (R-NV) as Affordable Footwear Act 2009. The new legislation, like the former, targets consumer sensitive footwear and has bi-partisan support. The bill’s logic is easy to appreciate. Smoot-Hawley was designed to protect domestic manufacturers, but that situation has dramatically changed as footwear manufacturers relocated abroad. Approximately one-percent of all footwear consumed in the US is actually manufactured domestically. Most of that one-percent is destined for the government (military) or is niche products like fishing waders and firemen boots and these items are excluded from the proposed legislation.
Originally it was hoped that the legislation would be included within the Stimulus Package. That didn’t happen, and the bill is now on its own.
Despite the obvious logic of the proposed bill, there are problems. First and foremost the tariff on shoes generates a tremendous amount of revenue for the Federal government. Even before the current fiscal crisis, convincing the Federal government to drop a highly profitable duty would have been difficult. In the present fiscal environment getting enough votes in Congress for passage will be like herding cats. Although shoe manufacturing long ago left for other countries, the perception that encouraging shoe imports is in someway anti-union is still a factor within the beltway.
Additionally, Congress now operates under pay-as-you-go (PAYGO) rules, and the cost of the duty savings on shoes will have to be offset unless these rules are waived. PAYGO was introduced in 1990 as a means of controlling Federal spending and lapsed in 2002. The PAYGO system was re-established by the House on January 4th 2007 by the 110th Congress. It would be difficult to gain support for waiving PAYGO or finding funds for an offset. Finally, around 80% of the shoe imports are from China (see chart on front page). Any changes in the tariff would likely dredge up the China trade debate. And few in Congress want to be seen as advoca

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American Journal of Transportation