December 15, 1977
Page 39340
OMA NEGOTIATIONS ON SHOES
Mr. MUSKIE. Mr. President, the United States recently concluded historic negotiations with the Taiwanese and Koreans to limit the import of nonrubber footwear into this country. The resulting agreements at last give the American footwear industry a chance to compete fairly in the marketplace.
William Scanlon of the Boot and Shoe Workers Union attended the talks as an advisor to the U.S. negotiators. It was his judgment that the agreements carry "more potential for the American footwear industry than we'd been able to win in 20 years of battle to save jobs."
He described the talks in an entertaining and insightful article in the November 1977 issue of Leather & Shoes magazine. I commend it to my colleagues and ask unanimous consent that it be printed in the RECORD.
There being no objection, the article was ordered to be printed in the RECORD, as follows:
OMA NEGOTIATIONS BEHIND CLOSED DOORS — AN EXCLUSIVE EYEWITNESS REPORT
(By William Scanlon)
(NOTE. The recent orderly marketing agreements with S. Korea and Taiwan, by now, have been well discussed, argued and analyzed. However relatively few people within the allied industries know the true 'inside' story that went on prior to the signing of these somewhat abstruse accords. William Scanlon, representing the Boot and Shoe Workers' Union and the United Shoeworkers of America, AFL–CIO at these delicate bargaining sessions, relates a personal tale of setback and satisfaction that went into the formulation of these trade agreements.)
It was one year, four months and six days since the opening of the first International Trade Commission hearing on an Escape Clause case that gave the American shoe industry a favorable decision by allowing that it was being damaged by too many imported shoes.
From President Ford, however, the decision got the industry complete inaction. Now, in May, 1977, five months after the ITC's second finding of damage to the industry, here was a team actually in the field and involved in direct negotiations with the governments of Taiwan and South Korea. When President Carter had acted on the ITC's second finding he had directed that the shoe industry and government solicit "voluntary" quotas from these two countries whose 1976 exports to the U.S. were greater than those of any other nations.
So, there were no real hammer-on-anvil directives to get quotas. Whatever came out of the talks was to be voluntary on the part of the two target countries. In this quest for orderly marketing agreements, the whole ball game was up for grabs.
Here was the lineup. The Government's negotiating team led by Stephen Lande and made up of representatives from State, Commerce, Treasury, and Labor; a group of shoe industry advisors and a labor advisor representing the concern of the industry's two unions; the Taiwan Shoe Manufacturers Association, the Korean Shoe Manufacturing Association, the governments of these two countries, the two groups of Americans representing the volume footwear dealers and the retail shoe interests. This was the heavy artillery. When the line was drawn, the U.S. Government team was right in the middle of the opposing forces.
At first look it seemed that the American footwear industry was outgunned. Here on the home turf of the "enemy" the industry people were seemingly alone. Both the Volume Footwear people and the National Retailers Association were quite at home with their Korean and Taiwanese business partners. Here were people making big money on shoes exported to the United States. They were determined that nothing was going to upset that arrangement. Very early on we saw the workings of the American Taiwan and American Korean network beginning to operate. Eddie Atkins, a retailer's representative and a longtime opponent of quotas and tariffs, stood in the doorway of Kaneda airport in Tokyo as we arrived.
He was waiting for his Japanese agents to further his trip to Seoul where the talks would open the next day. Remembering the numbers of Japanese, Taiwanese, and Koreans at the Washington ITC hearings we got the feeling that Atkins and his side of the case was going to have great moral support in this arena.
Ultimately, the fact that the Government's team was able to develop agreements cutting Korean imports to the U.S. by 11 million pairs, Taiwan by 22 million pairs, in the first period of a four period term, was an emphatic win in the face of the determined opposition it faced. Too, it was more proof of the reasonableness of both ITC decisions in the escape clause cases.
How was the battle fought? From what we could see of it, the fight was staged in hotel rooms. Day long sessions with their opposite numbers followed long evening social events staged by the Korean and Taiwanese negotiators for our team. With these ended, the team came back to the hotel dragging with exhaustion, whereupon we would get a full briefing on the day's events. That done, the arguments began.
Categories, shifting, spacing, export-import dates, style factors of vinyl, vis-a-vis polyurethane, definitions of vulcanizing, cementing, bonded warehousing to get around shipping date restrictions, TSUS numbers and definitions again, manipulation of payments through Swiss banks to disguise tricky billing practices used to hide overvaluation and underpricing of shoes to get around category limitations with the differences made up by later adjustments with the Swiss banks. All the tricks in the multinational handbook came out in these late night sessions. These round robins often went to 5:00 a.m. giving everyone but a few hours of sleep and thought alignment before the formal talks started all over again.
We didn't know what opportunities were given the Eddie Atkins, Frank Rooney, Larry McGourdy, and Norman Mercer group to argue with Lande's team. There wasn't enough time in the day to have accommodated them and us in our advisory roles. But they were getting their points across in some way.
Evident, too, was the fact that Taiwan and Korean negotiators in their respective sessions, were well aware of the presence of the two opposing forces on the scene to advise our negotiating team.
A reception at the home of the U.S. Embassy's Commercial Attache, one evening, had brought us all together in one room with Kim Sun Kil, the chief Korean negotiator. This "party" developed into a retrial of the ITC hearing in Washington five months before. Standing in a circle, faces wreathed in social smiles, arguments were swapped toe-to-toe. All this to the great delight of Kim Sun Kil, who said to the group, "So, even your people are split on this imports question!"
At one point in the debate, Larry McGourdy, a representative of Melville Shoe, was asked by someone why American manufacturers with superior expertise and advantages could not manage to get U.S. labor costs competitive with Korean costs. His response was that his company was pretty close to doing that .. . had actually reached the point where American labor costs were only 50 cents higher than Korean costs. Next question, naturally, was "How have you done this?"His answer, apparently a serious one, was, "We are working with Haiti on this." So, the impression was given that one American shoemaker is lowering his labor costs close to home!
Norman Mercer, agent for an American import operation called "Impassa" stepped to the fore and claimed credit for having brought a big American rubber footwear maker into the imports fold. He gave the group the same old heartrending story of the poor U.S. consumer being the ultimate victim of any cutback whatsoever in the volume of footwear from Korea to the U.S. He implied that the culprit was the American shoeworker whose greed for higher wages had brought about the need to trade with Korea and other low wage countries.
He was quickly told of the shopping experience our group had that afternoon which had produced several pairs of the very jogger type shoes Mercer had mentioned as a boon to the American consumer. The shoes, bearing brand names like John Havlick, Puma, Addidas, were sold to us at a flat $4 a pair in a Korean retail shoe store! How, it was asked can a $4 pair of shoes in a Korean retail store command prices of $29.95 and up when they are brought to the U.S.?
Why this huge difference in price? It isn't shipping costs. It isn't high duty. It isn't distribution costs. Is it then the extreme and very profitable markup taken by the retailer? Is the difference between the $1.40-$2 cost at a Korean factory, and the American selling price of 15 times this cost, an actual reflection of the cost of doing business with Korea?
If the reduction in Korean exports of footwear to the U.S. is going to hurt anyone in the next four years, it won't be the "poor American consumer" for whom Mr. Mercer wept. The consumer seems to be paying through the nose as it is. It's going to be the retailer and his supplier. These people are going to have to live with fewer pairs of Korean shoes to overprice.
We didn't see much of the volume footwear group after this quasi-social confrontation. So, we don't know how they kept up their pressure on the negotiators. When we left the Embassy that evening, there was a feeling among all of us that the Commercial Attache of our Embassy was opposed in principle to our purpose in being there.
Speaking with other Americans in Seoul during these talks, we learned something of the Korean side of the coin. Koreans have the positive belief that they are about to reach the point of economic achievement which will soon take them out of the role of a developing nation.
Naturally, they are disturbed about the possibility of losing the physical support of American ground troops whom they feel are a bulwark to the country's growing industrial economy.
Koreans, are, on the other hand, philosophical about what happens to them . . about what happens if America does cut back shoe imports. Resignation is one expression of this philosophy.
They say, "What real difference will shoe export cuts mean to us who have been kicked around for 6,000 years by the Mongolians, the Japanese, the Chinese, and others? We've survived everything the world has thrown at us . . . we'll certainly survive cuts in our U.S. shoe exports. And, besides, there are other markets we can go after."
But philosophy or not, the Koreans were hard-nosed bargainers. We left Seoul without an agreement and were to return there twice more before an agreement was reached. We now headed for Taiwan and its capitol city, Taipei, to meet the Taiwanese.
And meet them we did. First there were the agents on hand to meet their American clients, actually to welcome them to Taiwan. They have a most impressive way of doing this with Chinese food and hot rice wine. Not even the physical deterrent of having to use chopsticks could keep us from enjoying the Chinese banquets laid on by our hosts, a Chinese shoe manufacturer and his son with whom some of our group had had, or was having, dealings.
Then there was the dinner by the Taiwan Shoe Manufacturers Association, whose president Mr. Y. T. Wong, was also the negotiator for the Taiwanese government in the Orderly Marketing talks. For purposes of protocol, I suspect, Y. T. Wong did not attend this dinner. It was a carefully orchestrated affair at which each manufacturer had an opportunity to have at each one of us with arguments against cutbacks. They had not only arranged the seating so that a Chinese and an American would sit together, but the Chinese kept rotating from table to table and from American to American proposing toasts and presenting arguments.
A few of the young Chinese were aggressively and articulately opposed to any cutback of footwear from Taiwan to the U.S. Bashfulness was not one of their shortcomings. Together they drove hard to get their feeling across to us. So, the very pleasant dinner was laced with the spice of debate.
Then, again, in this new country, we began the exhausting routine of staying up all night in endless discussion with our government team after its long day of negotiation with Mr. Y. T. Wong and his group. This was a repetition of what we'd done in Korea. Here, I must say that I have great admiration for Stephen Lande and every one of his entourage from State, Commerce, Treasury, and Labor. They were cool under pressure, reasonable in argument, in full control of their tempers under the trying circumstances of 18 to 20 hour days, and most of all, patient with all of us in these grueling after hours sessions.
On May 17 the team informed us they had reached an agreement with Taiwan. Taiwan would reduce its exports to the U.S. by 21 percent in the first year beginning in June. This was 34 million fewer pairs than they had shipped in 1976. In each of three successive years they would be allowed to increase the shipments by 3 million pairs to a maximum, in 1980-81, of 131 million pairs. This added 3 million pairs to be a normal factor of growth in the market. The agreement covered all nonrubber footwear except paper disposable footwear, wool felt liners, and zoris.
The agreement included a side letter with the full force and effect of the pact itself, to limit the shipment of uppers to the 1976 figures. Taiwan, said the letter, had no intention of disrupting the American market with increased uppers shipments, nor to undermine the effectiveness of the agreement on nonrubber footwear.
Korea followed with its agreement to cut U.S. shipments by 11 million pairs in the first year of the four year pact. They got the same growth factor of 3,000,000 pairs in each of three years following the first year. Korea also wrote a side letter of agreement not to increase exports of leather work shoes other than at a moderate rate to be agreed on by the U.S. as a result of monitoring shipments. Unless careful monitoring of each point of each agreement is carried out on a regular basis, neither of the agreements will be of more than token usefulness.
There is work to be done, therefore, for the next four years on the monitoring front.
Stephen Lande and his people had whipped its agreements into acceptable temporary shape. A feeling of relaxation began to be felt. None of us of the advisory group was especially overjoyed with the results. But I think there was a consensus that a start of major importance had been achieved.
From the viewpoint of American labor in the footwear industry, for instance, nothing but a flat and total barring of all shoe imports, after our 20 years of losses to them, would have made us rejoice. But the reality of the situation made us realize the practicability of what we'd won . . . more potential for the American footwear industry than we'd been able to win in 20 years of battle to save jobs.
There's little point in telling the world that American footwear labor had pointed out in 1958, Cassandra-like as it turned out, the development of the very situation we had come to the Orient to correct in 1977. If the American shoe industry had applied its considerable talent, very evident on this trip, to heading off the imports problem in 1958, our trip would not have been necessary in 1977.
It was interesting to meet the U.S. shoe technicians who now live and work in Taiwan, Korea, and other places showing these people how to produce shoes salable in America. There's Mike . the ex-Haverhill shoemaker who does his job here for Melville Shoe. Mike's in Taiwan today and will be in Brazil or somewhere else in the low wage world tomorrow imposing a kind of quality control over workers who earn $7 a day in 98 hour work weeks making shoes for "the poor American consumer."
Then, in Korea, we met Armand, a Canadian shoeworker from Montreal who does this same kind of job for H. Brown, an American shoe manufacturer heavily involved in importing footwear. Armand talked of spending his time between Korea and Bogota, Colombia on his job.
Because one of our advisory group members was fortunate enough have a Taiwan agent who was interested in getting his client into one, we visited a shoe factory, the Fu An Industrial Corp., in Sanchung City, a 15 minute Mercedes-Benz ride from our Taipei hotel. This was a suburb of Taipei where one would rarely see American tourists. It was here that we saw how Taiwan shoeworkers earn their living and compete with American shoeworkers. In a dirty grey concrete block building, three stories high, Mr. H. F. Ong presides over the operation with the resounding title of the Fu An Industrial Corp. In the middle of an area teeming with people who seemed to be living in the streets, the factory stood alongside other similarly drab buildings. Alleys ran off the main road at right angles and small shops and selling activities lined every foot of the streets.
Fu An was special. Out of the street floor of the building oozed a stream of tannery wastes. Two skinny, mangy looking dogs tied to stakes paid no attention to the stinking ooze, nor to us, as we picked our way around it and climbed a flight of stairs to the second floor of the building. Up the stairs, and out of the direct aroma of the tannery, the good smell of leather cleaned the air until we reached the shoe factory floor and its overpowering smell of cement. This was a work area populated by women workers cementing soles to uppers.
At the feet of each woman, right in front of her machine, there seemed to be a child sitting, some free to move about, others confined to boxes or bamboo pens. The children were probably from one to three years old. There they sat impassive, immobile, inactive without so much as a simple toy to district or amuse them. They watched mother work as they got indoctrinated for their own futures.
A verse that said something about the drudgery of shoeworking in Lynn, MA's early factories, has the line about "Hannah at the window binding shoes". This came to mind with a lot sharper impact than Hannah's fate had made as I watched the children sitting on the factory floor. One child, a girl, sat in a bamboo pen as though she were a run down mechanical doll. Her eyes were terribly crossed. She sat docilely by her mother's machine where she had probably been sitting since early morning.
There was a police dog on a long leash hanging around the work area. He barked ferociously at us and lunged toward us to the limits of his leash. What his role was in the factory we didn't learn. But we formed some conclusions of our own.
These workers live in the factory. They eat and sleep there. For their 14 hour day they earn up to the equivalent of 50 cents an hour. The work week is seven days. Taiwan law says they are to have two days off each month. They rarely take this time. The work day is officially 10 hours and for the additional 4 hours they work they earn a bonus for the added production made in the extra hours. Overtime is an unknown word . . . they need a union. But the concept of unionism is a dirty one in Taiwan. These are the low wage competition for American shoeworkers.
I thought of the speech one of the American importers had made at that Korean reception at the U.S. Embassy, citing his deep concern for the "poor American consumer who would suffer from footwear cutbacks." I think that this very "poor American consumer," who could see how, and with whose lives, his bargain shoes from Taiwan were made, would be the first one to say,
" let's not continue to exploit these women and their kids. If this is the way it's got to be, I don't want any part of the shoes they make."
But Mr. Ong was a very friendly man. He served us tea, offered us cigarettes, and got immediately down to business with our colleague in the advisory group who was, it appeared, on a busman's holiday and riding the business-as-usual bus.
Another member of the advisory group, also a shoe manufacturer in the U.S., saw one of his company's shoe boxes in this factory. How it got there, or why, we didn't learn. But it was evident that this factory had at one time or another made the shoes that were packed in that box . and in how many thousand of other similar boxes?
In spite of its almost 18th century appearance and equipment, Fu An Corp. was a going operation. One of the workers told us that they had just completed a shipment of 40,000 pairs of army boots to Kuwait.
Some of the members of our group went individually to other shoe factories. Two men went to Pusan where one reported seeing an operation turning out 100,000 pairs a day. This was the Sami Iwa Co., Ltd.
The story of these negotiations could go on in endless interest and significant detail. There is little room to tell it all in one article. This much, at least has now been told with many of the subtle nuances of self interest and dedication suggested.
For myself, as the representative of the American shoe industry's two labor unions, I was honored to have been part of the advisory group. The members of the group were excellent companions, great to be with under the intimate conditions of the three weeks of frantic traveling from country to country imposed on us. Each member of this group proved to be sharp, knowledgeable and articulate. They were a good complement to the government team. Together, their tireless efforts accomplished more for the American shoe industry in three weeks than had heretofore been achieved in many years .. . a good beginning.
Now, it is up to the shoe industry itself to build on this beginning. A new era of progress for American shoemaking and for the thousands of American shoeworkers, whose lost jobs can be restored, can be a reality.
There is much work to be done; particularly in preventing importers from increasing their purchases from other low wage nations. This method of offsetting the small gains made in Korea and Taiwan has to be stopped by further negotiations with other countries found to be injuring the domestic shoe industry.