Pacific Rim Deal May Force New Balance To Run

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One company that's not happy about the prospect of a new trade deal with Pacific Rim nations is the running shoe manufacturer New Balance. New Balance still makes some of its shoes in the U.S. and it doesn't want to lose tariff protection. In fact, the company says, if it does, it will have to close its U.S. factories.

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President Obama is in Australia today. Next stop, Bali, for a summit with South East Asian leaders. Earlier this week, Mr. Obama and leaders of nine Asian countries agreed on a broad framework for a new trade deal. Details still need to be worked out. And that process is being watched closely in the offices of New Balance, a shoe company based in New England. It's worried it will lose tariff protection and may have to shutter its U.S. factories.

Jay Field of Maine Public Radio explains.

JAY FIELD, BYLINE: In Vietnam, workers on assembly lines crank out running shoes in single-story buildings, football fields long. In New England, where New Balance still makes sneakers in five factories, the production process is, shall we say, vertical.

PATRICK WELCH: Our elevator, though it is quite old, is all new parts, very safe.

FIELD: Patrick Welch, who manages the New Balance plant in Skowhegan, Maine, says materials move floor-to-floor in this 19th century textile mill much like they did over a hundred years ago. But this is not your great-grandfather's mill.

(SOUNDBITE OF MACHINERY)

WELCH: Steve goes at a good clip.

FIELD: In the basement, Welch and I watch as Steve LeClair, a New Balance machinist, cuts synthetic reflective strips for a new line of running shoes.

How many cases are you looking to achieve this hour?

LeClair barely looks up from his machine.

STEVE LECLAIR, MACHINIST: Seven cases.

FIELD: Seven cases. So you roughly know how many parts that would be, Steve, of this part?

MACHINIST: On this part, we got 28 cuts.

FIELD: LeClair is part of a chain of workers, all trying to hit their own hourly targets. Six years ago, before New Balance embraced so-called lean manufacturing practices, it took 14 days to produce a pair of sneakers. Today, it takes three hours.

This streamlined production allows the company to get sneakers to its number one market, the American market, overnight.

Lori Kletzer, who teaches at nearby Colby College, is an economist specializing in international trade.

LORI KLETZER: Quantity of output and quality, that's the way they can remain competitive relative to their competitors who are making these goods in other countries.

FIELD: And making them at a fraction of the price it costs New Balance to make them in Maine. The company freely admits that, even with the huge increase in productivity, manufacturing in the U.S. is a money loser. It's more a statement about its values and heritage than anything else, but now, New Balance worries a new free trade agreement could force it to finally abandon its U.S. factories.

PRESIDENT BARACK OBAMA: The TPP will boost our economies.

FIELD: President Obama committed the U.S. to a framework for the Trans-Pacific Partnership at the Apec summit in Hawaii.

OBAMA: Lowering barriers to trade and investment, increasing exports and creating more jobs for our people, which is my number one priority.

FIELD: Nine countries will be part of the new Pacific Rim free trade zone. One of them, Vietnam, is the fastest growing exporter of footwear in the world. Vietnam's labor standards are among the lowest in the world and the pay scales in its footwear factories are even lower than those in China. Its emergence has come at a time when it still pays a hefty tariff on rubber footwear, but under the TPP, Vietnam could be exempted from paying any tariff at all. And that, says spokesman Matt Lebretton, would be bad news for New Balance.

MATT LEBRETTON: We have a president who has said that he embraces a manufacturing agenda, yet folks are embarking on something that could effectively put our 1,200 folks out of business.

FIELD: So, Lebretton says New Balance is lobbying the administration hard to make sure that doesn't happen.

LEBRETTON: We're asking for them to carve out, from the tariff structure, any tariffs that would directly compete with the products that we're making here.

KLETZER: New Balance employment is very important within the region. It's certainly not a large employer from the perspective of, you know, the American economy.

FIELD: And that, says Colby College's Lori Kletzer, puts the Obama administration in a delicate position.

KLETZER: Once you protect for one company or one set of companies within an industry, you have bolstered the arguments for others to ask for the same.

FIELD: U.S. trade negotiators say they're having ongoing discussions with companies like New Balance to better understand their concerns, but heading into an election year, President Obama is in a tough spot. One of Mr. Obama's major constituencies, organized labor, has criticized him for not doing enough to protect U.S. manufacturing jobs, but free trade has been a rare area where the president and big business see eye-to-eye. Crafting a compromise that leaves both sides satisfied won't be easy.

For NPR News, I'm Jay Field.

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