July 29, 2011

Risking lost soles

A trade deal with Vietnam could be the final straw that forces New Balance to close in Maine and head overseas.

By PETER WHORISKEY The Washington Post

NORRIDGEWOCK - At the factory here owned by New Balance, the last major athletic shoe brand to manufacture footwear in the United States, even workers on the shop floor recognize that in purely economic terms, the operation doesn't make sense.

NEWBALANCE
click image to enlarge

Kirby Knox inspects a shoe at the New Balance factory in Norridgewock. Knowing that the company could make far more money if, like Nike and Adidas, it shifted most of its jobs to low-wage countries, Maine workers try to make up the difference through efficiency.

Photos for The Washington Post by Joel Page

NEWBALANCE
click image to enlarge

A worker uses a press to attach a shoe upper to the outsole at the New Balance factory in Norridgewock. Since 2004, the 350 workers at the plant have increased daily production by nearly 9 percent.

POST

The company could make far more money if, like Nike and Adidas, it shifted virtually all of these jobs to low-wage countries.

So employees try each shift to make it up. Conversations on the shop floor are sparse at best, and the tasks at each work station have been stripped of waste and precisely timed. Workers cut leather for a pair of shoes in 88 seconds, handle precise stitching in 37 seconds, and glue soles to uppers even faster.

"The company already could make more money by going overseas and they know it," said Scott Boulette, 35, a burly team leader who has his son's name tattooed in Gothic letters down his left forearm. "So we hustle."

Now, however, comes what may be an insurmountable challenge. The Obama administration is negotiating a free-trade agreement with Vietnam and seven other countries, and it is unclear whether the plant can stand up to a flood of shoes from that country, already one of the leading exporters of footwear to the United States.

"We are deeply concerned by the inclusion of Vietnam in a potential free-trade agreement," said Rob DeMartini, president and chief executive of New Balance.

The workers' predicament highlights the difficulty facing the Obama administration as it seeks free-trade agreements as a potential remedy for U.S. unemployment, now at 9.2 percent.

Backed by many economists, the administration says the agreement with Vietnam and the other countries, the Trans-Pacific Partnership, would create U.S. jobs by opening up Asian countries to U.S. exports such as computers from California and paper products from Maine.

"This agreement will create a potential platform for economic integration across the Asia-Pacific region, a means to advance U.S. economic interests with the fastest-growing economies in the world," U.S. Trade Representative Ronald Kirk told Congress in announcing that negotiations were about to begin.

Moreover, importing shoes from Vietnam at lower costs would benefit some in the United States, either by reducing prices for consumers or raising profits for manufacturers that have their operations overseas.

But the example of New Balance, which has long resisted the exodus of American footwear manufacturers, highlights the fact that despite the benefits of free trade, it can also destroy some U.S. jobs, and those losses are felt more acutely in a time of high unemployment.

"We want to fight really hard to keep this business in Maine," said Lori Cook, 28, a single mom with two kids. "I'd like to keep my job."

The company's primary concern is that any free-trade agreement with Vietnam would likely eliminate the steep tariff on footwear imported from that country, making Vietnamese sneakers even cheaper than they already are.

New Balance officials said removing the tariff would also undermine years of efforts at the company's five New England factories to compete against cheap foreign labor. The plants employ 1,000 workers.

Those employees earn upward of $10 an hour, plus benefits, while labor costs in China are about $1.50 an hour, and even less in Vietnam.

With the support of some New England legislators, the company is hoping that an unusual exemption can be created in any agreement with Vietnam to maintain the tariff on the shoes New Balance makes in the United States.

"Making footwear in the U.S. isn't as easy or as profitable as making them overseas. If it were, every company would still be doing it," DeMartini said. "We will continue to ask our negotiators to embrace President Obama's manufacturing agenda and to save what is left of our nation's once-vibrant shoemaking economy."

(Continued on page 2)

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