Shoe Quotas a Costly Idea to Save Jobs : Estimates Range from $50,000 to $80,000 per Worker
The novel import-quota idea for the shoe industry recommended last week by the International Trade Commission would cost American consumers between $50,000 and $80,000 per job saved for an industry in which the average wage is about $14,000, according to government and private economists.
The quotas, which would cut imports of foreign shoes by about 35%, theoretically would save about 30,000 jobs in the industry, which has dropped to 120,000 workers today from about 215,000 in 1970, according to William Cline of the Institute for International Economics.
Cline said such quotas would cost $80,000 per job saved. According to the ITC, the quotas would cost almost $50,000 for each job saved. The costs would be incurred as the prices of imports and domestically made shoes increased.
Cline said the quotas would cost consumers about $2.5 billion a year, compared to an estimate of $1.3 billion by the ITC.
The ITC commissioners and outside trade experts were unclear about how exactly the quota system would work. That would be left to the President, they said. However, the quota system devised for the shoe industry probably would be more efficient and less of a windfall for foreign producers than conventional quotas and tariffs, trade experts said.
The plan would cut shoe imports to 474 million pairs from 726 million pairs in 1984 under a system in which shoe importers would bid for the right to bring foreign shoes into the country. The ITC vote marked the first time that a majority of the commission called for quota sales, authorized by the 1979 Trade Agreements Act.
Because quota sales never have been tried before, it was unclear late last week which government agency would conduct the bidding, who would be able to bid, how often the bidding would take place and what would prevent one company from buying all the import opportunities.
ITC Chairwoman Paula Stern said in an interview that it was up to the President to decide what agency would hold the bidding. It could possibly be the U.S. Customs Service, she said. Stern said that the commissioners heard about the bidding system during the series of hearings on problems in the shoe-industry and that they adopted it as a compromise rather than recommending straight quotas or tariffs.
According to trade experts, the plan probably would work this way:
Shoe importers, whether retailers, wholesalers or even subsidiaries of foreign companies based in the United States, would be allowed to bid at an auction held by the government to import a certain number of pairs of shoes from anywhere in the world. The importer making the highest bid for the particular number or kind of shoes being auctioned at that time would get the right to import those shoes.
Under a regular quota system, importers contract to buy goods from foreign companies, but they never know when the quota will be filled with orders from other firms. They often order goods that are held at U.S. borders in bonded warehouses because by the time they place an order and it arrives, the quota limit has been reached, trade experts said.
This problem for importers, who must pay to have the goods stored, has been persistent in the steel industry, which is under a quota system, trade experts said.
Under the auction system, the importer would know he had the right to bring in the goods ordered.
On the negative side, foreign producers could begin exporting only their most expensive shoes to the United States, depending on how expensive the license to import the shoes would be, the experts said.
One benefit that the ITC considered, Stern said, was that the added cost of shoes because of the quotas would be recouped by the Treasury, rather than foreign shoe companies. Under tariffs, the government would get the added revenue, but, when regular quotas are in effect, foreign companies generally increase prices to make up for loss in volume. This could still happen under the bidding process, but probably by smaller amounts to keep the prices of the shoes affordable, experts said.
Stern said that the commission did not take into account the effect of the quotas on the consumer. That is the job of the President, she said.