A monster trade deal once looked like it would provoke a classic David-versus-Goliath duel within the shoe industry, pitting New Balance, a company that puts an emphasis in manufacturing its shoes stateside, against Nike, the archetypal outsourcer.
So it’s left many Democrats scratching their heads that President Barack Obama is making a big move to side with Nike.
Obama visited Nike’s Beaverton, Oregon headquarters on Friday. He made his pitch for a Pacific Rim trade deal that the United States and 11 other countries are now negotiating, and for a bill that greases the wheels for that pact to clear Congress.
“We have to make sure America writes the rules of the global economy, and we should do it today while our economy is in the position of global strength,” Obama told the largely supportive crowd. “Because if we don’t write the rules for trade around the world, guess what: China will.”
He’s making a bet: The odd politics of embracing the sports giant offers one of his best chances yet to make the case that the Trans-Pacific Partnership is different, better, than the trade deals that have come before it.
The trip puts Obama in position to argue, if implicitly, that it’s OK to leave low-skilled manufacturing jobs behind in order to add higher-paying jobs of the future – like Nike’s U.S.-based designers, product engineers, marketers and more.
Nike vs. New Balance
The original foil for Obama’s trade deal was New Balance, the Boston-based company that employs hundreds of workers throughout New England, including more than 700 in manufacturing jobs in Maine. Early in the negotiations, the company stood alone in its industry in highlighting the damage the deal could do to its U.S. workers.
But Obama’s administration has convinced New Balance – which maneuvered behind the scenes to work some extra protections into the negotiations – to put its opposition on hold.
That’s in part because of one of the industry’s dirty secrets: Even its model citizen, New Balance, imports 75% of its product from overseas, and it stands to gain from the axed tariffs as well.
Still, Obama’s Nike visit defies conventional political wisdom.
It’s logical that Obama would visit a left-leaning state as he tries to rally at least some Democratic support for the trade deal. The resistance to both the Trans-Pacific Partnership a legislation called trade promotion authority, which would allow Obama to fast-track the deal to a vote in Congress without amendments, has been fierce, and driven by Obama’s traditional allies.
“On every progressive issue, they’re right there with me. And then on this one they’re like whooping on me,” Obama said at the rally stage in front of Nike’s signature swooshes Friday. “On trade, I actually think some of my dearest friends are wrong.”
But Presidents typically lobby for trade deals by visiting big exporters that could gain even more overseas customers by making more of a product in America and selling it into new markets. In Nike, Obama is making the case for a company that already imports almost all of its product, and likely would find its additional jobs outside of manufacturing.
The Obama administration’s view is that if lower-cost foreign labor makes Nike’s shoes and athletic gear cheaper to make, that can mean more profits to plow into development efforts in Oregon, where the company says it employs 8,500 workers and delivers an economic impact that tops $2.5 billion per year.
“We believe trade agreements that encourage free trade allow Nike to do what we do best: innovate, expand our businesses and drive economic growth,” the company said in a statement. “Nike supports TPP because it will open global markets and enhance Nike’s ability to compete.”
But critics argue that manufacturing jobs in the United States have been persistently battered by the lower-cost labor made possible by trade deals, and the Pacific Rim deal would undercut New Balance, one of the few U.S. companies to even attempt making a meaningful share of its shoes within the country.
“Nike epitomizes why disastrous unfettered free-trade policies during the past four decades have failed American workers, eroded our manufacturing base and increased income and wealth inequality in this country,” Vermont Independent Sen. Bernie Sanders, who recently launched a campaign for the Democratic 2016 presidential nomination, wrote to Obama in a letter this week.
Sanders wrote that the deal would “do nothing to encourage Nike to create one manufacturing job in this country. It would simply make Nike more money and increase the compensation packages of its executives.”
The Vietnam questions
Central to that criticism is that the country that would gain most of the manufacturing jobs made possible by the Trans-Pacific Partnership is Vietnam, a country that’s part of the negotiations and would see its products become even cheaper as tariffs are dropped.
The Asian nation’s poor labor conditions have repeatedly been hammered by international human rights groups, with a report last year saying children as young as 14 had been pulled from rural areas and forced to work 12-hour days.
So how big of a problem could cheaply made, tariff-free Vietnamese shoes and shirts become?
That depends on the outcome of some of the trade deal’s most supremely nerdy battles. One is when and how the tariff cuts will be phased in.
Another is whether the United States will get the rules it wants that only allow Vietnamese-based manufacturers to sell their goods cheaply into the United States if every bit of those products – from the yarn forward – are made there.
That issue has been a huge focus of the U.S. textile industry, which long pointed out that Vietnamese companies routinely weave fabric from yarn made in China, raising the specter that the trade deal could give Chinese companies a back door into an even greater share of the U.S. market.
Initially chilly to the Trans-Pacific Partnership, textile-makers have since embraced the White House’s pledges that it is insisting on strict rules on that issue.
Concerns over labor conditions
Labor unions like the AFL-CIO have also hammered the deal, pointing to Vietnam’s labor conditions and saying they don’t believe Obama’s argument that the deal will give the United States tools to make sure better standards are enforced.
Lori Wallach, who heads the consumer advocacy group Public Citizen’s Global Trade Watch, acknowledged Obama’s argument that the Trans-Pacific Partnership would include labor rights as a core component, rather than the side agreement that labor was in the North American Free Trade Agreement.
But she said previous free trade deals – like the Colombia, Panama and South Korea pacts that Congress approved during Obama’s first term – included “enforceable” labor mandates that still haven’t lifted conditions enough in those countries.
Her criticism was aimed directly at Nike.
“Why would the President honor a firm that has grown and profited not by creating American jobs, but by producing in offshore sweatshops with rock-bottom wages and terrible labor conditions?” Wallach said.
Asked about the Nike visit this week, White House Press Secretary Josh Earnest said the details on why Obama is making the trip would become clearer once he’s actually there on Friday.
“The President is looking forward to visiting the Nike headquarters and using it to illustrate how a responsible trade agreement that includes enforceable labor and environmental standards would strongly benefit middle-class families and the American economy,” he said.