Email to a Friend
Stumble It!
WASHINGTON.
The Bush administration decided Thursday to impose a 5 percent tariff on Honduran socks later this year after finding that imports of low-priced cotton footwear from Central America were hurting struggling sock makers in North Carolina and Alabama.
Though the move could temporarily improve U.S.-made sock sales by boosting the price of Honduran socks, smaller domestic sock makers called the gesture a sham that will do little to prop up their rapidly vanishing businesses.
"This administration has forgotten about the working person. Period. They don’t care," said Dennis Martin, president of North Carolina Sock in Hickory, N.C.
The passage of the Central American Free Trade Agreement broke down economic barriers between the U.S. and Honduras. Since its passage in 2005, sales of domestically made socks have fallen sharply, while imports of cheaper, tariff-free socks from Honduras have spiked.
Because of cheap labor, socks made in Honduras cost less than socks made in the U.S. A provision of CAFTA allowed the Bush administration to impose a tariff of up to 13.5 percent for up to 3 years on Honduran socks, if it determined that the imports were undercutting the domestic industry.
After negotiating with the Honduran government, trade officials decided to impose the 5 percent tariff for six months — from July 1 until the end of the year.
"We believe that this remedy is appropriate," Matt Priest, Deputy Assistant Secretary for Textiles and Apparel for the Department of Commerce, said in a conference call with reporters.
Martin and other U.S. makers said the maximum percentage and length would have allowed them to carve out a niche in the new global marketplace. Six months at 5 percent, Martin said, will not provide enough of a buffer.
"I’ll be out of business within a year. I’m holding level now. Unless the people of this country open their eyes and say, ‘We’ve got a problem here, we have to keep our money in this country,’ we’re in trouble," he said.
In Hickory and other sock manufacturing hubs in the Southeast, many smaller, family-run sock plants have gone bankrupt in the face of growing Honduran competition.
But the open doors have been good for larger apparel companies. Some have subsumed smaller companies in North Carolina and Alabama, shuttered them and move production to Honduras.
And the cheaper competition has helped keep prices low, one reason Wal-Mart and other retailers joined larger sock makers that operate in Honduras — such as Canada’s Gildan — in asking the administration not to impose a tariff.
Priest said the rate was set at 5 percent because the average tariff on socks from Honduras before CAFTA was about 5 percent.
It was necessary to cut off the tariff at the end of the year, he said, because imports of Chinese socks are expected to rise sharply when certain trade restrictions on that country expire.
If the tariff on Honduras is still in place then, domestic manufacturers will still lose business, but more of it will go to Chinese companies than Honduran ones. But if the tariff is removed, some of that business will swing back to the Hondurans.
The administration would prefer to give that business to Honduras than the Chinese, Priest said, because of the relationship under CAFTA. And, he said, most socks made in Honduras use U.S. cotton, while Chinese socks do not.
"The integration of our hemisphere is something that’s important to our industry, and we didn’t want to cut into that," he said.
Over the six month period that begins July 1, Priest said the tariff would cost the Honduran industry $3.5 million. He said he did not know how much revenue it would generate for U.S. companies.
Jim Schollaert, a Washington lobbyist for several smaller domestic sock-makers, charged that the administration was playing up the threat of Chinese imports to justify a decision made on behalf of larger, international sock companies that are shifting business from the United States and Canada to Honduras.
He asked: "They said the last thing they want to do is disadvantage our Honduran trade partners. What about U.S sock makers? What about U.S. workers?".
Sean Mussenden can be reached at 202-662-7668 or at smussenden@mediageneral.com.
The Bush administration decided Thursday to impose a 5 percent tariff on Honduran socks later this year after finding that imports of low-priced cotton footwear from Central America were hurting struggling sock makers in North Carolina and Alabama.
Though the move could temporarily improve U.S.-made sock sales by boosting the price of Honduran socks, smaller domestic sock makers called the gesture a sham that will do little to prop up their rapidly vanishing businesses.
"This administration has forgotten about the working person. Period. They don’t care," said Dennis Martin, president of North Carolina Sock in Hickory, N.C.
The passage of the Central American Free Trade Agreement broke down economic barriers between the U.S. and Honduras. Since its passage in 2005, sales of domestically made socks have fallen sharply, while imports of cheaper, tariff-free socks from Honduras have spiked.
Because of cheap labor, socks made in Honduras cost less than socks made in the U.S. A provision of CAFTA allowed the Bush administration to impose a tariff of up to 13.5 percent for up to 3 years on Honduran socks, if it determined that the imports were undercutting the domestic industry.
After negotiating with the Honduran government, trade officials decided to impose the 5 percent tariff for six months — from July 1 until the end of the year.
"We believe that this remedy is appropriate," Matt Priest, Deputy Assistant Secretary for Textiles and Apparel for the Department of Commerce, said in a conference call with reporters.
Martin and other U.S. makers said the maximum percentage and length would have allowed them to carve out a niche in the new global marketplace. Six months at 5 percent, Martin said, will not provide enough of a buffer.
"I’ll be out of business within a year. I’m holding level now. Unless the people of this country open their eyes and say, ‘We’ve got a problem here, we have to keep our money in this country,’ we’re in trouble," he said.
In Hickory and other sock manufacturing hubs in the Southeast, many smaller, family-run sock plants have gone bankrupt in the face of growing Honduran competition.
But the open doors have been good for larger apparel companies. Some have subsumed smaller companies in North Carolina and Alabama, shuttered them and move production to Honduras.
And the cheaper competition has helped keep prices low, one reason Wal-Mart and other retailers joined larger sock makers that operate in Honduras — such as Canada’s Gildan — in asking the administration not to impose a tariff.
Priest said the rate was set at 5 percent because the average tariff on socks from Honduras before CAFTA was about 5 percent.
It was necessary to cut off the tariff at the end of the year, he said, because imports of Chinese socks are expected to rise sharply when certain trade restrictions on that country expire.
If the tariff on Honduras is still in place then, domestic manufacturers will still lose business, but more of it will go to Chinese companies than Honduran ones. But if the tariff is removed, some of that business will swing back to the Hondurans.
The administration would prefer to give that business to Honduras than the Chinese, Priest said, because of the relationship under CAFTA. And, he said, most socks made in Honduras use U.S. cotton, while Chinese socks do not.
"The integration of our hemisphere is something that’s important to our industry, and we didn’t want to cut into that," he said.
Over the six month period that begins July 1, Priest said the tariff would cost the Honduran industry $3.5 million. He said he did not know how much revenue it would generate for U.S. companies.
Jim Schollaert, a Washington lobbyist for several smaller domestic sock-makers, charged that the administration was playing up the threat of Chinese imports to justify a decision made on behalf of larger, international sock companies that are shifting business from the United States and Canada to Honduras.
He asked: "They said the last thing they want to do is disadvantage our Honduran trade partners. What about U.S sock makers? What about U.S. workers?".
Sean Mussenden can be reached at 202-662-7668 or at smussenden@mediageneral.com.