World Footwear

Trade

Matt Priest, President of the FDRA, live on World Footwear

May 26, 2015 United States
Matt Priest, President of the FDRA, live on World Footwear
A reflection about the worldwide footwear industry and the US market, without forgetting the future expectations for the sector’s development
The footwear industry in the United States had an intense year of activities in 2014. Tensions at the West Coast Ports, the negotiations of two major trade agreements and the duties on imports have kept the industry on the spotlight in the American country. World Footwear spoke to Mr. Matt Priest, President of the Footwear Distributors & Retailers of America (FDRA) to go over these themes.

International Trade
In 2014, the US, the largest importer of footwear (20.6% of the world share according to the World Footwear Yearbook) bought 26.6 million US dollars worth of footwear from other countries, with main suppliers being China (66%), Vietnam (14%), Italy (5%) and Indonesia (5%).
Three Asian countries (China, Vietnam and Indonesia) supply 94.3% from the total 2.35 billion pairs of shoes entering the US. According to Matt Priest, these numbers reveal an “unquestionable dependency” on external markets.
The US has been trying to diversify away from traditional suppliers of footwear in the last 6 or 7 years. Labor shortages and increasing costs in China, and the appearance of new opportunities in other countries, have contributed to this shift. “We have seen a lot of growth in imports from Vietnam, our second largest supplier, but China is still the unquestionable leader”, Mr. Priest told us, adding: “Our industry is looking for new sources but we don’t expect things to change dramatically in the short term. We don’t expect to see another dramatic shift such as the one seen in China in the last few decades. For starters, there is no other country with China’s capacity that can emerge and become a player as relevant as China has been”.

Duties on imports

Linked to imports is the issue of the duties applied. According to numbers released by FDRA, tariffs on footwear have hit an all-time high in 2014, with nearly 2.7 billion US dollars paid. “Exorbitant duties” are imposed on footwear imports said Mr. Priest, “especially if we bear in mind that in the US there is barely any domestic manufacturing of footwear”. So in a country with “320 million consumers, which buy on average 7.3 pairs of shoes per year” imposing duties on footwear imports costs billions for everyone, not just the importers, but every single American consumer”.
FDRA aims to eliminate these duties, or at least significantly reduce the burden imposed by high tariffs.  Key to its efforts its the negotiations of two of the most important upcoming free trade agreements, the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), according to Mr. Priest.  “Our government is heavily engaged in two robust free trade agreement negotiations, the TPP and TTIP. TPP is an excellent opportunity to cut down such heavy costs imposed on the industry and will drive important changes, such as alleviating the burden on consumers (who will directly feel the benefit) and also companies, which will also have the opportunity to hire more people. As for the TTIP, although products coming from Europe are less impacted by duties, there is still an opportunity to cut costs with this agreement and boost trade. Our congress has been very focused on trade as of late and we are hopeful that it will approve Trade Promotion Authority (TPA) for President Obama very soon.  Without this authority, it will be very difficult for the President’s team to finalize the negotiations for both of these agreements.”

Tension at the West Cost Ports

The end of 2014 and beginning of 2015 were marked by the tensions at the West Coast ports resulting from disagreements between workers’ representatives and the port’s management, impacting, for example, imports of footwear, clothing and electronic equipment, and exports of agriculture products. 67% of all footwear imports enter the country through the Ports of Long Beach and Los Angeles. Although tensions were resolved with the agreement reached in March Mr. Priest believes “port infrastructure is still under extreme pressure due to the large amount of goods passing through each day, so infrastructure investments will be vital to improving productivity and efficiency”.

Future challenges

As for the main challenges for the future, Matt hasn’t hesitated to highlight the need for “retailers to meet customer expectations. For example, traditional brick and mortar stores will need to find a way to integrate online strategies into their businesses. Companies will have to focus on obtaining higher purchase conversion rates and engaging with customers in a multitude of ways. “
Other challenges lie in the constant change in global sourcing dynamics. "Exploring new locations and establishing production in certain parts of the world, such as Cambodia, Africa and Bangladesh will also be important”, said Mr. Priest.
“The world is changing rapidly, and businesses need to be on top of all these changes in order to respond in the most effective and innovative ways. As difficult as this might seem, it also means we are in the middle of extremely exciting times for our industry.”

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