Doing Business : If the Shoe Fits, Japan Still May Not Buy It : An American firm slams up against protectionism rooted in a bizarre social taboo. But this Maine company is shoe-leather tough--and ‘impatiently patient.’
When America’s cobblers got trampled by a wave of foreign-made footwear in the 1970s, a modest, family-run shoemaker based in Dexter, Me., hunkered down, rationalized its operations and emerged as one of the few survivors. Now, Dexter Shoe Co. is doing something that might have been dismissed as next to impossible not too long ago--selling shoes in Japan.
Or, at least Dexter is trying to sell shoes here.
The problem is, its distributor is stuck with a government quota on the number of imported shoes it can sell at the standard 27% tariff rate: 7,312 pairs every six months. Above that, a punitive tariff of 60% is levied, making retail prices prohibitively high.
And a Catch-22 prevents importers from expanding their quotas, which, in principle, are allocated on the basis of the number of shoes already being imported. In other words, you had to sell foreign shoes last year to import them again this year.
“Dexter is not a company in a hurry,” said Daniel A. Miller, president of Dexter’s marketing division in Boston, who recently visited Japan to make the rounds of government officials and business contacts. “We’re impatiently patient.”
Japan’s protected shoe industry offers one of the most blatant examples of the kind of market barriers frequently blamed for stopping U.S. exports and preserving America’s $49-billion trade deficit with its Asian ally.
At the heart of the shoe barrier is a delicate political accommodation and a murky social taboo: The Japanese leather and footwear industry is ostensibly dominated by the burakumin, a hereditary caste discriminated against over the ages for engaging in “unclean” trades such as tanning and mortuary work.
To compensate for past--and present--injustices, the government shields the leather industry from foreign competition.
“Japan is now paying the price for unequal treatment (of the burakumin) and is not able to apply free-market principles,” said Yutaka Kosai, president of the Japan Center for Economic Research and a member of the Industrial Structure Council, a panel of prominent academics and industry leaders advising the government on trade policy.
“No one wants to discuss the burakumin, “ said Dallas Pyle, an export agent based in Portland, Me., who introduced Dexter to the Japanese market. “It’s an extremely sensitive issue--so sensitive it doesn’t exist.”
Still, by all accounts Dexter is doing everything the right way in its efforts to sell to Japan. After being approached by Pyle and a Japanese distributor in 1986, the company retooled, investing $200,000 in new equipment to make shoes sized for Japanese feet. The goal was to export 50,000 pairs worth about $1.5 million each year.
“In the past, nobody in the Dexter Shoe organization was export-oriented,” said Miller. “It’s sort of the bad old New England mentality, that selling overseas is more trouble than it’s worth.
“We had been exporting, but we were doing it more by accident than by design--the hard way,” he said. “God forbid if someone sent us a telex to place an order. We didn’t know how to answer.”
Privately held Dexter, which bills itself as “America’s largest independent shoemaker,” currently has annual sales of between $250 million and $300 million. Exports account for less than 1% of total sales.
The scheme to sell in Japan got off to a strong start. In 1987, Dexter shipped 35,000 pairs of shoes after its Japanese distributor acquired options on unused import quotas from other dealers. But last year, it was not so lucky. The quota was cut in half, and Dexter now has thousands of pairs of Japanese-sized shoes sitting in a Boston warehouse.
“Dexter in a way is a model company. They’ve been trying very hard, but they’re a victim of the system,” said a U.S. official in Tokyo. “To their credit, they’re not complaining about the past. They’re looking to the future.”
Part of the past about which Dexter might complain is a deal struck in 1986 between U.S. trade officials and the Japanese government.
The U.S. side agreed to drop charges in a trade dispute over Japan’s closed leather industry in exchange for limited liberalization--from absolute quotas to the tariff-quota system--and “payoff” tariff concessions for unrelated U.S. commodities, such as aluminum.
“It obviously didn’t help much if you were a shoe exporter,” said the U.S. official, who spoke on condition that he not be named.
More than U.S. shoes are at stake, however. High-priced fancy brands made in Europe dominate the imports, and multilateral negotiations on the restrictions are now pending before the General Agreement on Tariffs and Trade, possibly paving the way for further liberalization.
Meanwhile, Dexter is constantly being “shopped” by the big Japanese trading houses that broker in the coveted shoe import quotas. But Miller said he feels loyalty to the family-run distributor, Chukyo Moonstar of Nagoya, which has been conscientiously promoting Dexter’s “image” in Japan as well as lobbying for an increased quota to sell the shoes.
“We could do more business here tomorrow if we went with one of the large trading companies,” Miller said. “But we have too much respect for the efforts of Chukyo Moonstar to seek alternatives. We made our deal with them, and we’re going to stick with them.”
