In this age of political strife, it is very good to see a
bipartisan effort to make life easier for the poor. The Affordable
Footwear Act (AFA) is such an effort. Introduced last month by
Representatives Joe Crowley (D-NY), Kevin Brady (R-TX), and Nancy
Boyda (D-KS), the AFA would repeal the disproportionate tariffs on
shoe imports. High protectionist tariffs on inexpensive footwear
hit the poor hardest, raising the price of a basic necessity.
Congress should repeal the tariffs and help all Americans save a
few dollars on their next pair of work boots, pumps, or
The Shoe Tax
The little-known shoe tax has its roots in the early history of
American trade policy. A hundred years ago, tariffs raised most of
the government's revenues. But after six decades of trade
liberalization, the tariff system is now a small backwater in tax
policy, and most U.S. tariffs are quite low. There are no tariffs
on toys, furniture, semiconductor chips, personal computers, or
telephones. Even tariffs on cars amount to only 2.5 percent. A few
household goods, however, are still subject to tariff rates almost
as high as those of the 19th century.
Shoes are the extreme case, with tariffs 10 times the average
rate, and cheap sneakers face the highest tariffs the U.S. imposes
on any manufactured good. These tariffs, magnified by retail
markups and sales taxes, are included in the price families pay for
Footwear tariffs are simply a hidden, regressive tax on a
household necessity. Their sole effect is to reduce the amount of
income families have to spend on all other goods and services. This
expense is most onerous for low-income families with children, who
spend the largest share of their income on the necessities of life.
The Affordable Footwear Act, which would eliminate cheap-shoe
tariffs, is a straightforward way to help these families stretch
their household budgets further.
The High Cost of Footwear Tariffs
Americans bought about 2.4 billion pairs of shoes last year. China,
Italy, Vietnam, Brazil, and Indonesia are the top suppliers. The
value of these shoes at the border was $19 billion, and the U.S.
government collected footwear duties amounting to almost $1.9
billion on the shoes. While the average weighted U.S. tariff rate
across all traded goods is 1.6 percent, tariffs on shoes begin at
8.5 percent for leather dress shoes, rise to 20 percent for running
shoes, and peak at more than 60 percent for some grades of cheap
U.S. free trade agreements (FTAs) and trade preference programs
for developing countries provide little relief from high footwear
tariffs. The bulk of America's imports of inexpensive shoes come
from countries that are not FTA partners and are ineligible for
preferential rates, such as China and Vietnam.
The consequences for families--especially those with low
incomes--are dramatic.Tariffs inflate the cost of the cheapest
shoes by about a third. A $2.28 pair of sneakers arriving at the
border is assessed a 48 percent excise tax, adding $1.09 to the
price, which is passed along to shoppers. To put the tax in
perspective, the $1.09 border tax is roughly three times the
39-cent federal tax on a $2.28 pack of cigarettes, four times the
national gas tax, and twice the $13.50-per-gallon tax on whiskey,
vodka, and other spirits. And as the sneakers travel through the
supply chain on the way to the retailer's shelf, the tariffs are
magnified by retail markups and state sales taxes.
Overall, tariffs raise shoe costs by about a tenth. Shoes
account for just one percent of total imports but raise almost $1.9
billion out of $25 billion in annual U.S. tariff tax revenue, about
8 percent of the total. After markups and sales taxes, shoe tariffs
made up $4 billion to $5 billion of the $55 billion Americans spent
on shoes last year.
By eliminating tariffs on footwear produced abroad, the
Affordable Footwear Act would have an immediate and meaningful
impact on household budgets. The International Trade Commission has
estimated that completely eliminating all domestic barriers to
footwear imports would lower the average price of shoes by about
4.3 percent. As the cheapest shoes face the highest
tariffs, the effective tax cut would be highest for the poorest
families. The AFA presents a solid first step toward realizing
these gains from freer trade.
No Impact on Jobs
Many tariffs are in place to protect American industries and
jobs from international competition. But the shoe tariffs support
virtually no domestic shoemaking and protect no U.S. manufacturing
jobs, because America's footwear manufacturers today produce
specialty and high value footwear, not the kinds of inexpensive
shoes that make up the bulk of imports. The inexpensive shoes and
sneakers with the highest tariffs have not been made in the United
States since the 1970s.
America's 16,000 shoe industry jobs are almost all in design,
research, marketing, or specialized production of sophisticated
gear for workers in hazardous jobs, rather than mass-market shoe
production. Yet, high and protectionist tariffs on
inexpensive footwear have been untouched since the 1950s. The
industries that lobbied to put them in place are long gone. Today,
these tariffs serve only to needlessly raise the price of shoes,
without fulfilling the usual rationale for protectionism--saving
U.S. manufacturing jobs.
If you wish to understand a person's life, the familiar proverb
goes, walk a mile in his shoes. The Affordable Footwear Act would
make the next pair more affordable for low-income families.
Congress should give America's households a little extra help by
repealing the archaic, unnecessary, and regressive tariffs on shoe
Edward Gresser is Director of the Trade and
Global Markets Project at the Progressive Policy Institute, and Daniella Markheim is
Jay Van Andel Senior Trade Policy Analyst in the Center for
International Trade and Economics at The Heritage Foundation.
American Footwear and Apparel Association,
"Shoe Stats 2007," June, 2007.
Department of Labor, Bureau of Labor Statistics,
"Employment, Hours and Earnings Survey" for
job totals at www.bls.gov/ces/home.htm; conversations
with shoe industry people on production.