It’s that time of year again as children return to school across the country and that seasonal anxiety runs high, for parents and kids alike.
Some of parents’ anxiety surely comes from near-record spending on back-to-school items. The National Retail Federation (NRF) reports back-to-school spending for students grade K-12 has grown 55 percent over the past decade to $27.3 billion in 2016, averaging an unprecedented $673.57 per household this year. Accounting for $126.55 of that tally, per-household back-to-school spending on footwear even exceeds spending on school supplies.
While per-household back-to-school footwear purchases have risen over the years, the duties passed along to shoppers on imports of children’s footwear have risen even faster.
The Footwear Distributors and Retailers Association’s (FDRA) recent Back-to-School Children’s Footwear Report shows duties on children’s footwear topped the $300 million mark in 2015 for first time. In other words, while total back-to-school spending has grown 55 percent, duties paid on children’s footwear imports have surged nearly two-fold—up a disproportionate 191 percent—over the same 10 years.
If that wasn’t bad enough, the way our outdated tariff system from the 1930s is written, the lower the cost of the shoe, the higher the footwear duty rate is applied to it—meaning working class families struggling to stretch their dollars are spending much more for shoes than needed.
Footwear duties, like all manufacturing and distribution costs, are multiplied at retail. These costs can include warehouse, transit, marketing, inventory and labor costs, all added on top of the duty bill and magnifying the final footwear price at retail.
We estimate these egregious duties result in American families paying $921 million more than necessary for children’s shoes, in 2015 alone. But relief for U.S. families is at hand.
Children’s footwear imports from Vietnam are on the rise as companies look beyond China to diversify their sourcing and to find lower production costs. In fact, Vietnam supplied a record 55.3 million pairs of kids’s shoes in 2015. This year, that trend has continued and Vietnam now accounts for more than 10 percent of total children’s footwear imports—something unthinkable just a few years ago. This trend is important to American families’ pocketbooks because we have a chance to substantially cut into footwear costs on shoes from Vietnam.
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The Trans-Pacific Partnership (TPP), a landmark free-trade agreement, has been finalized and will soon be considered by Congress for an up or down vote. The Office of the U.S. Trade Representative says the agreement will “Promote economic growth; support the creation and retention of jobs; enhance innovation…” at a time when American’s working class needs it most.
TPP does all this through the elimination of duties on a range of goods coming into America, including children’s footwear, which would save families millions each year.
We estimate the TPP will cut roughly $125 million in duties on children’s footwear imports in the first year of implementation.
Over the twelve-year phase-in of footwear trade under the TPP, total duty savings are estimated at $1.5 billion just on children’s footwear.
As we reduce this tax, it also means the price tag parents see will be much lower in stores and online. In fact, we estimate the elimination of children’s footwear duties means American families will save $4 billion at retail in just over a decade once TPP is implemented.
For footwear companies, this is a once in a generation chance to address the elephant in our costs structures—the one cost we haven’t been able to trim even as we see leaner supply chains. By cutting out duties and lowering retail costs, the industry will benefit through new increased demand and purchasing power. Duty savings from the TPP will also help strengthen and create thousands of footwear jobs across the U.S. in manufacturing, trucking, retail, warehousing, design, marketing, administration and at our nation’s ports.
In spite of all the benefits for footwear and the broader economy in the agreement, lots of political rhetoric and fear mongering on both sides of the aisle is muddying the water for voters as the presidential election looms.
While President Obama continues to lobby for congressional passage of the agreement, both presidential candidates from the two leading parties have come out strongly against the TPP. Many expect the only opportunity for Congress to vote on the TPP this year will come during the lame?duck session after the November elections and before the newly elected Congress and president return to Washington in January. Any postponement beyond 2016 could jeopardize this monumental agreement.
Much like with school assignments, if this work is submitted late, it is unlikely to get passed. Therefore, we strongly encourage you to contact your congressional representatives to advocate for this key piece of legislation before time expires. And now you can do so from your desk in just 30 seconds.
Please click on this link to take action on behalf of families and footwear workers across America. Just fill out your name and address to pull up your representatives and click send to issue them a pre-written letter on the positive impact TPP would have on children’s footwear costs.
This is a timely action as FDRA is holding a fly-in in mid-September in Washington, D.C. where many major footwear companies will be meeting with Members of Congress to advocate for TPP. Your letter can help lay the groundwork to make these meetings a success. Together we can help make this agreement a reality. Stay tuned as FDRA will continue to keep the industry updated on the politics of footwear in Washington, D.C. and around the globe.
By Matt Priest, president, Footwear Distributors and Retailers of America (FDRA)
This piece is part of the outreach by footwear, apparel, travel goods and retail industry organizations to raise awareness regarding the positive economic potential of the TPP trade agreement. Want to learn more about footwear trade? Join 200 footwear trade and supply chain professionals at FDRA’s FTDC conference in October. Learn more at FDRA.org/FTDC.