Footwear Sales Agreement

							                    BEFORE
                      THE
        TRADE POLICY STAFF COMMITTEE
   THE U.S.-THAILAND FREE TRADE AGREEMENT
              WRITTEN TESTIMONY
                    OF THE
FOOWEAR DISTRIBUTORS AND RETAILERS OF AMERICA
         PETER T. MANGIONE, PRESIDENT
                 MARCH 30, 2004




FOOTWEAR DISTRIBUTORS AND RETAILERS OF AMERICA
         1319 F Street, NW, Washington, DC 20004
           Tel: 202-737-5660; Fax: 202-638-2615;
     Website: www.fdra.org; E-mail: ptmangione@fdra.org


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The following written comments are submitted on behalf of the Footwear Distributors and Retailers of America (FDRA)
pursuant to notice in the Federal Register, February 27, 2004, at page 9419 regarding the free trade agreement (FTA)
between the U.S. and Thailand.

FDRA member companies account for approximately three-quarters of all footwear sold at retail in the U.S. Its members
account for the vast bulk of imported footwear into the U.S. and are well positioned to comment on the overall footwear
market in the U.S. and the impact of elimination of tariffs would have on U.S. producers and consumers.

FDRA advocates elimination of all duties on all footwear without phase-out, on the first day of implementation of this
FTA.

Eliminating duties on footwear imports into the U.S. will not harm the U.S. shoe manufacturing industry and will benefit
consumers. Because imported footwear is so much lower priced than comparable domestically produced footwear -- even
after application of current MFN tariffs -- domestically manufactured footwear cannot compete on price with imports.
Instead, consumers are harmed by footwear tariffs because they are forced to pay higher prices on imported footwear
without benefit to U.S. producers. Moreover, as is explained below, there is no connection between maintaining shoe
duties and the continuance of domestic shoe manufacturing jobs.

Also, reversing decades of controversy, there is now a consensus among the associations representing the retail,
distribution and manufacturing sectors in the footwear industry to eliminate duties on all footwear immediately upon the
implementation of the FTA with the exception of the 17 items enumerated by the Rubber and Plastic Footwear
Manufacturer’s Association, for which there is no consensus (Annex 1).

As is explained, herein, FDRA believes that the duties on the 17 numerated items should be eliminated on the first day of
implementation of the FTA. We urge this because like all footwear items, the MFN duties to which these items are
subject are simply too low to come anywhere near bridging the huge gap that exists between the lower price of imported
items (with the duty added) and the much higher price of domestically-made items.

In sum, we believe that all footwear should be included in the negotiations and that all duties on all footwear into the U.S.
under this agreement should be eliminated entirely on the first day of implementation of such agreement.

OVERVIEW: U.S. FOOTWEAR SECTOR. The marketplace for footwear in the U.S. is nearly all imports, with only a
relative handful of U.S. firms continuing to manufacture domestically. In 2002 (the last year for which U.S. footwear
manufacturing statistics are available), imports accounted for approximately 97% of U.S. consumption by quantity of non-
rubber footwear, 95% of consumption of fabric/rubber and plastic outsole footwear, and 86% of rubber protective
footwear; when U.S. shoe exports are taken into account, total U.S. import penetration for all footwear was 98% in 2002
(Table 1).

Imports dominate the U.S. footwear market notwithstanding the fact that the average duties on footwear are among the
highest in the U.S. tariff schedule (Table 2). MFN duties on non-rubber footwear range from 6% to 10% while those on
rubber footwear are among the highest in the U.S. tariff schedule ranging up to 67% ad valorem equivalent (i.e., 37.5%
plus 90¢ at $3.01 equals 67%) (Tables 2 and 2A).

Despite this tariff protection, imports dominate U.S. consumption because footwear is a highly labor intensive product.
Thus, U.S. producers, burdened by high U.S. labor rates, are unable to compete with imported footwear on price, even
after application of the duties. The price of imported footwear, after the application of MFN duties, is vastly cheaper than
U.S.-produced items (Tables 3 and 4). The price differentials, after application of U.S. duties in the non-rubber footwear
area, are over $15 per pair (about 60% lower in price), and the price differentials for high duty rubber footwear are some
59% lower per pair. Given the enormous disparity between landed, duty paid import prices and domestic competition, it
defies logic to assert that a removal of the tariffs could affect the price competition between U.S. and imported items.
Indeed, given the vast disparity, there would be no U.S. production whatever, were price the determinant criteria. Clearly,
it is not, as is evidenced by approximately 2% market share controlled by U.S. manufacturers.




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The only plausible conclusion is that the remaining U.S. production survives on bases other than price. A recent
International Trade Commission (ITC) investigation regarding the elimination of footwear duties (on imports from
Mexico) found that there would be “little or no adverse” effect on U.S. producers or workers. The Commission concluded
that:

                    domestically produced footwear articles compete mostly on non-price factors such
                    as brand names, product quality and differentiation, and support services. It is
                    likely that a significant portion of expected duty savings will be passed on to U.S.
                    consumers. ITC Investigation No. 332-433, October 2001, p.1.

Accordingly, successful U.S. shoe manufacturers, being unable to compete with imports on price, have, instead,
differentiated their products from imported footwear on the basis of specialized types of footwear (e.g., sizes/widths, hand
sewn items, etc.), quality, exclusive retail channels of distribution, rapid responsiveness and, especially, brand names
(where the brand holder controls production and distribution and maintains its market niche on brand awareness).
Because domestic producers successfully compete in the face of already lower, duty-paid, import prices, duty elimination
would be inconsequential to their sales.

U.S. SHOE WORKER JOBS. It is, thus, clear that U.S. shoe manufacturers have cultivated niches for their unique
products and that they compete in the marketplace on those characteristics, not on price. It follows that there is no
connection between the continuance of duties and maintaining employment in this business. These jobs are dependent on
the success of the niche product positioning and of the brands represented by the firms involved.

CONSUMER COST OF DUTY MAINTENANCE. Perhaps the most compelling reason for eliminating duties on
shoes is the punishing costs it imposes on the public. During 2002, some $1.6 billion was collected in duties on shoes, a
total surpassed only by textiles, electronics and autos -- industries that dwarf shoe sales (Table 5). Using the conventional
keystone retail markup, consumers paid some $3.2 billion last year as a result of duties on shoes.

During 2002, duties collected in the high duty rubber footwear area exceeded $487.9 million, with consumer costs at retail
exceeding $976 million. With employment in this sector at approximately 1,600 workers, the cost per job at retail is
$609,951 per job. In the lower duty non-rubber area, duty collection was $1,102 million, with consumer costs at retail in
excess of $2,204 million. With some 15,220 footwear manufacturing jobs (2001 data; the latest available), that sector had
a cost at retail of $144,787 per job. For all footwear the retail cost was $189,055 per job (Tables 6 and 7).

Footwear sales account for only 1.33% of the value in total imports annually, but represent 8.35% of total duties collected
-- a disproportion of over 6 times! (Table 5)

Empirical Evidence that Consumers Reap Benefit of Lower Trade Barriers. The empirical evidence available in the
footwear sector demonstrates that trade barriers (quotas) drive up prices, both at the factory and retail levels, and that their
elimination drives down prices, at both the factory and retail levels. This experience with quotas on shoes demonstrates
that the elimination of other restrictions, such as the tariffs, will respond to the same competitive forces. Also, the retail
price of low price slippers fell sharply following the Customs ruling permitting essentially the same items to be imported
at 12.5%, rather than 37.5% duty.

The U.S. negotiated orderly marketing agreements (OMA) on footwear with Taiwan and Korea covering the period from
June 28, 1977 until July 1, 1981, when the OMA’s expired, and were not renewed.

The quotas drove prices up sharply. In the case of Taiwan (which restricted plastic items), average FOB prices went from
$1.98 per pair in the first year of the quota to $4.76 in the last (Table 8). Similarly, prices on quota footwear from Korea
(which restricted leather items) went from $4.39 in the first year of the quota to $7.61 in the last (Table 9).




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The average price per pair at retail of all U.S. footwear consumption rose during the same period from $15.62 to $26.22
(Table 10). (We know of no data that specifically tracks the retail price of the quota items. The quota items represented
such a significant portion of U.S. footwear consumption (about 20%) that the large shifts in their prices (up and down)
were sufficient to drive the price pattern of overall shoe prices.)

When the quotas came to an end, average FOB prices from the quota countries fell: in the case of Taiwan, the average
FOB went from $4.76 in the last year of the quota to $3.81 in the first full year without the quota. Similarly, quota
footwear from Korea fell from $7.61 in the last year of the quota to $7.26 in the first year without the quota. In both
cases, average FOB prices continued to decline in the next year as well.

Not surprisingly, the average price per pair at retail of all U.S. footwear consumption also fell in the first year after the
quota by 11.7% and in the second year after the quota by 4%.

This evidence demonstrates that in a highly competitive environment, as is the case of footwear, the elimination of trade
barriers, be the quotas or tariffs, have an immediate impact at FOB and are reflected in retail prices as well.
Indeed, we can think of no better demonstration of the highly competitive environment in which footwear is sold at retail
than the average price paid for all footwear and for that sold in discount self-services stores as recorded by the Footwear
Market Insights (FMI) (a survey based market segmentation service relied upon by the shoe industry). The average price
of all footwear sold at retail hardly varied over the 10 years from 1990 to 2000, beginning the period at $31.30 per pair
and ending it at $32.97 per pair (Table 11). Similarly, sales at discount self-service outlets begin the decade in 1990 at
$16.20 per pair and ending it at $16.38 per pair. The intense price competition in the sector, essentially takes no notice of
inflationary pressures in the economy, as reflected in the CPI (which rose significantly during the 1990’s), and is precisely
the type of environment that transfers cost reductions, such as duty elimination, significantly to consumers.

SUMMARY. In the end, high footwear duties do not protect U.S. shoe manufacturers or U.S. jobs, and, in fact, have
proven to be almost useless in this function, as imports now occupy nearly the entire market, despite the tariffs. Moreover,
the continuance of duties on footwear, serves only to punish consumers by forcing them to pay higher prices.

The following sections discuss particular segments of the footwear market:

NON-RUBBER FOOTWEAR. Essentially, non-rubber footwear encompasses leather and most synthetic items
(including most athletic product, which typically has leather or synthetic as the principal upper material), is subject to
duties in the 6% to 10% range and accounted for some 82% of U.S. shoe imports, by volume, in 2002 (Table 1); the sector
accounts for some two-thirds of shoe duties collected each year ($1,101,826,841, which is 69.3% of total shoe duties,
$1,589,787,778, collected in 2002; Table 7).

The American Apparel and Footwear Association (AAFA), which has traditionally represented non-rubber shoe
producers, supports duty elimination.

RUBBER FOOTWEAR. The rubber footwear sector encompasses shoes with a rubber outsole and (1) have a fabric
upper, (2) are protective in nature or (3) are in heading 6402 and have a “foxing”. They are subject to high duties, most in
the 37.5% range and up, and accounted for about 12%, by volume, of U.S. imports in 2002; the sector accounts for 31%
of footwear duty collections annually ($487,960,937 in 2002).

We note that the Rubber and Plastic Footwear Manufacturers Association (RPFMA), which has traditionally represented
U.S. rubber shoe producers, has sought an exemption from any duty cuts, applicable to its list of rubber footwear items.
The 17 items cover 3.45% of total footwear imports by volume in 2003(Table 12). Significantly, the RPFMA does not
object to duty elimination of other rubber footwear, which accounts for 8.89% of total footwear imports by volume and
covers such key consumer items as rubber/fabric slippers (6404.19.35 and .19.50).




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As noted, after application of the high MFN duties, imports are more than 55% lower priced than domestic rubber
protective items and 59% lower for rubber fabric ones (Table 4).

In light of the competitive situation described above, there is no rational basis for exemption or stretching out duty
elimination. Since elimination of duties on imports of shoes will have no effect on the competitive situation relative to
U.S. manufactured shoes, we urge immediate elimination of duties on shoes into the U.S. on the first day of
implementation of those agreements.

Given the demonstrable ineffectiveness of the current high tariffs in the rubber footwear area to protect U.S. production
and the limited significance of remaining U.S. manufacturers of rubber footwear as suppliers to U.S. consumers, there is
no justification for such extraordinary protection.

As explained herein, notwithstanding duties on rubber footwear ranging up to an ad valorem equivalent of 67% and
averaging in the 30% range, imports are vastly lower priced, even after application of these duties. The proof that this is
so is the fact that despite the extraordinarily high duties, there are a mere handful of viable U.S. producers remaining in
the field. Indeed, the exit from production during 2001 of Converse, by far the largest and highest profile U.S. company
manufacturing rubber/fabric footwear (it was also the last U.S. firm manufacturing rubber/fabric athletic shoes), signals
the advent of a new paradigm in this sector. We also note that the leading U.S. manufacturer of rubber protective
footwear, La Crosse Rubber, has discontinued U.S. production and no longer supports maintenance of the duties in this
sector. Similarly, Tingley Rubber has also ended its U.S. production. Also in 2002 S.G. Footwear closed its factory
(Attachment). It was the last significant U.S. producer of fabric upper/rubber outsole slippers and casuals, 6404.19.35,
1950, 1970, et. al.

As we have maintained for many years, the extraordinarily high tariffs are simply insufficient to shield U.S. production
from foreign competition. Moreover, the current import penetration of 95% for rubber/fabric footwear in 2002,
demonstrates compellingly that only those firms that differentiate their product in the marketplace on a criteria other than
price can continue to manufacture in the U.S. Indeed, the five shoe manufacturers represented in the RPFMA are each, in
their own way, classic examples of successful U.S. manufacturing in the face of significantly lower priced import
competition. It defies all logic to assert that these firms, which already compete in the face of imports, which are some
59% lower priced after application of U.S. duties, could somehow be harmed -- due to new price competition -- by the
elimination of those duties.

An examination follows of the items for which the exclusion is sought:

Protective Rubber. This group includes the following HTS numbers in 6401: .10.00, .91.00, .92.90, .99.30, .99.60,
.99.90, and in 6402: .30.50, .91.50, .99.20, and in 6404: .19.20. These items are waterproof and/or protective in nature.
To qualify for waterproof, which is covered by those items in HTS 6401, the item essentially must be of molded
construction. The items in 6402 and 6404 are the type which provide protection against water, oil, grease chemicals cold
or inclement weather and may or may not be made of a molded construction.

With the exit from U.S. production of Tingley Rubber and La Crosse Rubber, the largest U.S. firm in this field, the 2002
production in the sector decreased substantially. The diminution in U.S. production has also been associated with decline
in market demand.

For 2002, the last year for which U.S. production data is available, domestic shipments of protective rubber items fell 62%
against 2001 output, to 2.75 million pair, which represents about 14% of U.S. consumption. The total market for these
items also fell by some 10% in 2002.

Again, as noted above, we believe that duties are irrelevant to U.S. sales, because the imports, even after application of the
duties, are so much lower in price. Accordingly, lowering or ending the duties would not affect U.S. competitiveness.
(The converse is also true: keeping the duties in the FTA would do little to help these firms, as the continual closure of
factories demonstrates, despite the continuance of MFN duties.)




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Our view is buttressed by the Mexico experience where elimination of more than half the MFN duty under NAFTA has
had no effect (Table 12A). As of January 1, 2003, Mexico NAFTA duties on these products from Mexico are 12.5%
(with one exception at 8.3%). Significantly, Mexico has no (or de minimus) trade to the U.S. in all but a few of these
headings.

What little production of protective rubber footwear there is in Mexico, seems largely to be concentrated in a single firm,
Tingley Rubber, which closed its U.S. production, relocating some to Mexico in the 2001-2002 period. While the
RPFMA has asserted that this move was due to the phase-out in NAFTA duties, we note that while this may be a
contributing factor, the intense and much lower price competition from China seems the more likely explanation.
Obviously, wage rates are drastically lower in Mexico than in the U.S. and would itself provide a compelling rationale for
relocation. It must also be said that it is problematical as to whether this firm, even with reduced NAFTA duties, can be
competitive with lower cost items from Asia, particularly China, which dominate these items.

Moreover, the other RPFMA U.S. manufacturers of this general type of footwear are well positioned by their brands and
specialty items to weather duty-free competition, as evidenced by their continued success in the face of much cheaper
landed cost imports, especially from Asia suppliers. Indeed, Genfoot America and Norcross Safety Products, which
manufacture rubber, waterproof and protective footwear, have, each developed high quality, specialized, niche products
that compete in a marketplace awash with lower priced import competitors. Norcross, for example, specializes in
protective footwear for fire fighters, the petroleum and chemical industries and the like. Genfoot, capitalizing on its
Canadian parentage, makes high quality outdoor and winter items that have developed a strong brand following.

Rubber and Plastic “Foxing”. These items appear under heading 6402.30.70, .30.80, .91.80, .91.90, 99.80 and .99.90.,
are footwear, having rubber or plastic outsoles and a rubber or plastic upper and face MFN duties of up to 67% ad
valorem equivalent due to the “foxing”.

All of these items would be considered non-rubber footwear, except for the fact that they display the feature described in
the tariff as a “foxing or foxing-like band”. This notorious trap in our footwear nomenclature has historical roots in
Congress’ attempt in the mid-1960’s to treat certain plastic upper Japanese footwear which had an appearance similar to
fabric sneakers, in a classification mode that assigned to them the astronomical duties associated with rubber/fabric
sneakers. In the marketplace today, these items are indistinguishable from those without “foxing”, which bear duties of a
mere 6% (and zero from Mexico under NAFTA, which significantly has virtually no trade in such items). Indeed, the
footwear trade has learned over the years to design its product in such a way as to avoid the “foxing” duties. With the
proper design, many shoes, but not all constructions, can be designed in such a way as to avoid these punishing duties.
Unfortunately, however, some of the most popular athletic models are caught in this heading.

To the best of our knowledge, New Balance is the only U.S. producer of such items domestically; the firm principally
assembles imported components and parts into complete items “assembled in the U.S.”. This firm, one of the amazing
success stories of U.S. shoe marketing, has capitalized on its powerhouse athletic brand, size and width strategy,
complimenting its vast import business (perhaps 75% or more of its total sales are imported complete shoes) with U.S.
manufacturing of leather casuals and some synthetic athletic product. It owns two factories in Massachusetts and three in
Maine, reportedly, in total employing about 1,500 workers. This firm, which is not publicly traded, reportedly had sales
of $1.1 billion in 2001 and has increased its market share to 14.7%, second only to Nike, in the U.S. athletic shoe sales.
Clearly, its market share has continued to grow in 2002, although sales apparently flattened in 2003.

There can be no doubt that New Balance is highly profitable, as it gains market share on Reebok, adidas, etc., and that it
surely does not need high tariff protection. If it elects to subsidize its U.S. factories from profits on its imports, and,
thereby, make those factories viable, it is surely their prerogative. But it is perverse public policy to force U.S. consumers
to pay huge amounts in duties to cater to the eccentricity of one brand.

We also note that the largest concentration of New Balance’s U.S. production, according to their website, is leather upper
casual types, those traditionally made in New England, which have MFN duties of 8.5%/10% and are duty-free under
NAFTA. Clearly, if this U.S. producer is able to remain competitive against lower priced imported models -- even for
items where the MFN duties are relatively low -- there is little to support their claim that elimination of high duties will
hurt domestic output of those types of products. Indeed, the two headings in this group that represent some 80% of the

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trade involved -- 6402.99,90 and 6404.11.90 -- only carry a duty of 20% -- clearly not anywhere nearly enough to
equalize the huge disparity in lower import costs, and not much different, in commercial terms, from the 8.5-10% duty on
non-rubber items, made by New Balance in the U.S. without apparent risk from imports.

Rubber/Fabric Athletic. The only heading here is 6404.11.90. This is the area formally the domain of Converse. To the
best of our knowledge there is no U.S. production of this type of footwear. Accordingly, there can be no basis for not
ending duties on these items on day one of the agreements.

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The ITC should also be aware that in a submission dated May 5, 2002 the RPFMA advised the ITC that the following
rubber footwear HTS numbers were not manufactured in the U.S.: 6402.99.30, 6404.11.50, 6404.11.60, 6404.11.70 and
6404.11.80 (identified by asterisk in Table 12A). We note that the letter referred to a total of seven items: 6402.99.80,
which the RPFMA has subsequently decided is manufactured in the U.S., and 6403.91.60B, a heading that does not
appear in the U.S. HTS and has not appeared on subsequent RPFMA lists; 6403.91.60 is non-rubber footwear, zero duty
under NAFTA. The first item is popular plastic footwear with open toes and open heels, while the remainders are fabric
upper rubber outsole athletic types of various first-cost values. Under NAFTA, duties are not eliminated for these items
until January 1, 2008. We submit that there is no basis for not making the duty zero on these items on the first day of the
implementation of these FTA’s.

Impact of Zero Duties. Perhaps the most concrete evidence of the irrelevance of the current tariffs is the fact that
previous elimination of most of them under NAFTA, CBI and AGOA -- covering nations with low wages and shoe
industries -- has resulted in modest or no increase in shoe imports from those entities. The reality is that these duty-free
imports cannot compete with other, lower priced imports (even those facing the high U.S. duties) and are not imbued with
the market savvy necessary to diminish niches occupied by remaining U.S. producers.

Indeed, much is made in the RPFMA arguments of the effect of duty-free status on footwear from the Caribbean under
CBI. RPFMA notes that footwear imports rose from 200,000 pair from CBI countries before elimination of the duties to
an excess of 5.0 million pair in 1999. It is worth noting that total imports of rubber/fabric footwear, heading 6404, from
CBI countries fell to just over 4.0 million pair out of total imports of nearly 300 million pair in 2001 and they have
remained at that level through 2003. The CBI is also a unique case, since the shift of a few million pair there is the result
of U.S. producers going there in an attempt to compete with Asia suppliers; even zero duties have proven to be only a
modest boost. The absence of duties, are only scant incentive for importing into the U.S. Low initial prices are the key
and even low wage countries such as Guatemala, Costa Rica, Nicaragua and the Dominican Republic, coupled with
essentially duty-free status (under Section 222 of CBI), simply cannot compete, except on a small scale, with lower price
suppliers from Asia. In CBTIA the CBI countries achieved NAFTA status. The statistics show no discernable increase in
imports, slightly decreasing in 2002 and 2003 (Table 14).

In addition, RPFMA notes that Mexico has become the second largest supplier of rubber footwear to the U.S., suggesting
that the phase-out of duties under NAFTA is responsible. In fact, the bulk of the rubber footwear imported from Mexico
(the exception being the protective items noted earlier) comes as a result of a single 807 program, which predates
NAFTA. Moreover, there has been very little variance year-to-year in those imports (before and after NAFTA), despite
reduction by half of duties under NAFTA with a decrease in 2002 (Table 13); even the duty–free status under NAFTA
since January 1, 2003 on these items has done nothing to change the pattern.

Despite zero duties on all footwear, including the high duty rubber items (there is no special treatment for the RPFMA 17
in AGOA), shoe imports from the Sub-Saharan nations under AGOA actually fell from 188,000 pair in 1999 (before
AGOA) to 143,600 pair in 2001, the first year under AGOA, to even less in 2003 (Table 15). Clearly, if the elimination
of duties had anywhere the power suggested by the RPMFA, goods would be following under AGOA; in fact, the trickle
continues.

In short, there is no evidence that elimination of duties has had any impact on footwear trade flows from countries where
the duties are eliminated; the evidence points to no impact.



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THAILAND. The country is of moderate size by Asian standards, with a population of about 64 million people. It has
annual shoe production of about 270 million pair, with just over half consumed locally, with the remainder exported,
according to SATRA’s World Footwear Markets 2004 (Table 16). For 2003, Thailand shipped 25.6 million pair to the
U.S., a market share in units of 1.28% (Table 17). Thailand’s footwear shipments to the U.S. have been essentially flat
since 1997, although average unit value has fallen significantly from about $13.58 in 1997 to an average price of $11.13
in 2003 (Table 18). The sharp devaluation of the Thai baht, following the Asia financial crisis of 1997-98, relentless price
competition from China and the shift to some lower price items in the Thai shoe manufacturing industry, including higher
concentration of children’s footwear, has accounted for the fall in average price and the sharp reduction in the total value
of Thai shoe exports to the U.S.

Thailand is in a constant struggle with China for market share in the U.S. market. For 2003, on a units basis, China had a
market share of 81.3%, as opposed to Thailand’s share of 1.28%. The average price of footwear imported from China
into the U.S. in 2003 was $6.42, while it was $11.14 from Thailand (Table 19). Two principal factors give China a huge
competitive edge of Thailand: (1) China’s per hour wage cost are about 39¢ per hour, while Thailand’s are about 68¢ per
hour and (2) China has at least 200 industrial-type footwear factories, while Thailand has only about half-dozen (Table
19). The significantly lower China wages and the huge edge in capital investment allow China to achieve significantly
higher productivity, economies of scale and lower ex-factory prices. Any advantage that Thailand might receive due to
the elimination of duties on its products into the U.S. market, would, essentially, be used to make-up the competitive gap
between it and China. The lower duties would operate to make its products more competitive in the U.S. market against
the already significantly lower priced items from China.

The bulk of Thailand’s exports to the U.S. are in the athletic category. Thailand is an important supplier of product to
Nike for the U.S. market. Significantly, nearly all other athletic brands have abandoned Thailand as a supply base for the
U.S. market, owing to the more competitive pricing and productivity found in China and in Vietnam. Accordingly, the
advantage of duty-free imports into the U.S. would give Thailand competitive edge it needs against its Asian competitors,
particularly China.

As to the 17 items enumerated by the RPFMA, Thailand has virtually no trade in these items. In the case of protective
rubber footwear, Thailand, unlike China, has virtually no production infrastructure for this type of footwear; its
specialized nature, and relatively small volumes, do not make it an attractive area for new investment. As to the athletic
types in the 17, even here Thailand’s participation in the U.S. market is essentially incidental. Again, virtually all of these
categories are dominated by imports from China. We submit that the elimination of duties in these headings would only
serve to make Thailand more competitive against China and would not affect U.S. production (Table20).

COUNTRY OF ORIGIN. We support the utilization of a “tariff shift” rule of origin for footwear (i.e., from parts to
shoes) or a change to headings 6401 through 6405 from any other heading. We oppose the NAFTA rules of origin for
footwear. We also oppose a value of domestic content rule and instead favor a process rule embodied in the tariff shift
rule of origin.

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In sum, the duties on footwear into the U.S. have long outlived their usefulness and relevance in the marketplace; the
disproportionate and absurd burden on the consumer argues for their immediate elimination. Accordingly, we urge, that
all footwear duties be eliminated immediately upon the effective date of this free trade agreement.

We appreciate your attention.




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