A Thousand Jobs in the Hand Are Better Than...

...imaginary jobs that might or might not materialize. As a long-time customer of New Balance shoes (not only do I like the shoes, but they're U.S. made), it looks like a 'free'* trade agreement will kill off 1,000 existing jobs in Maine (italics mine):

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.

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.

The argument for the trade agreement:

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.

Given the pathetic history of trade agreements for U.S. workers, I think the Obama administration will have to do better than hypothetical job creation due to a market in a desperately poor country. And please, the "profits for manufacturers that have their operations overseas" won't be passed on to you: they'll sit offshore, until the next 'tax holiday.' As one worker put it:

"If customers pay a few more dollars for a pair of shoes, then so be it," said Sheri Fuller, 54, who has worked at the factory for 24 years. "If you take jobs away from people, the hit is going to be a lot bigger."

Keep real, existing jobs here.

An aside: As Noah Smith notes, there is a serious argument to be made that technological innovation in manufacturing processes has been replaced by cheap foreign labor. If you're an efficiency devotee, that should really bother you.

*As Barry Lynn points out in Cornered, all markets have rules and regulations--the question is who benefits from those rules. There are no 'free' markets.

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As Noah Smith notes, there is a serious argument to be made that technological innovation in manufacturing processes has been replaced by cheap foreign labor. If you're an efficiency devotee, that should really bother you.

On the other hand, it shouldn't bother you in the least if you think the benefits of comparative advantage are real.

for what it's worth, New Balance makes some excellent walking and working shoes with very good foot support. still, but for how much longer?

By Nomen Nescio (not verified) on 25 Aug 2011 #permalink

Remember when Obama the candidate told us that he would stop tax incentives for companies that move their operations overseas. I know that this is not exactly the same, since we are talking about a company that would be tanked by allowing the market to be flooded with less expensive apparel. But to me this epitomizes Obama the terrible economist.

This (transfer of manufacturing/production to other countries with cheaper labor) would be fine IF:
- there were a generous social-safety net for the displaced workers
- there were an industrial policy which actually would provide other jobs, say more high-tech ones, for the displaced workers.
Both conditions, unfortunately, do not exist in the U.S.
(Well, there is an industrial policy, and recent events show it only favors the upper levels of the 'financial' industry.)--
If everything is made abroad, how can imports be financed, if you don't produce exportable goods? (So much for the service industry). But perhaps the U.S. plan is to increase unemployment and desperation until wages here are 'competitive' with those of Asian countries. I hear Henry Ford paid adequate wages, so his workers could be customers, too; this lesson (even if mythical) may be have been lost; with the upper 0.1% of the income distribution absorbing all productivity gains over the last 20 years, too little went to workers = consumers (who consumed anyway by increasing their debt, thus hiding the problem for a while; the upper 0.1% then had too much money to consume it all, and started a real-estate bubble.)

The northern European countries, and even Japan, seem to do pretty well, producing exportable goods even with high wages and taxes fully financing a welfare state creating a more stable life for their citizens. But U.S. elites have succeeded in denouncing them as 'socialist.'

So let's close all borders and impose tariffs on everything. Let's produce our jeans in the US (for $200 each?), our tablets, iPhones, computer chips, cars, plastics, furniture, carpets, lightbulbs. The same for all other countries. French red wine is bad anyways. I don't want no Mexican torillas here.

But then why should we import our stuff in California from Nevada? Let's impose tariffs on stuff from Nevada, I prefer my T-shirt local. And Oregon, too.

Hm, hang on ... where is that wheat going to come from? So maybe we can exclude food at least.

Or maybe not! tariffs on wheat from Kansas! It's going to be expensive - but at least we're keeping the jobs here!

Sorry but I'm not sure if this will get us anywhere...

By Maximilian (not verified) on 23 Sep 2011 #permalink