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1. From the attached article “New Balance wants its tariffs: Nike doesn’t”
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discuss these questions: (1 page)
a. What are the business reasons behind the offshoring of shoe production from the U.S. to other countries?
b. Who wins when there is free trade? Who loses? What is government's role in the trade arena?
2. From the attached article “Outsourcing: A passage out of India” discuss these questions: (1 page)
a. What are the business reasons behind the "push" to offshore jobs?
b. Is "nearshoring" jobs, i.e., to Brazil or Poland, a viable alternative to offshoring to India? Why?
May 7 - M a y 13,2012 Bloomberg BusinessWeek New Balance's 2011 revenue Global Economics the committee number is a $20 million cut in funding for this year's Economic Census, considered the foundation of U.S. economic statistics. Although the Economic Census hap- pens every five years, its managers say they require continual funding through a six-year cycle. Reamer says that idea ap- pears to be lost on the committee, which reduced funding in part because it says the bureau won't start analyzing the data until the end of fiscal year 2013. Accord- ing to its funding request, the Economic Census needs funds to cover the cost of mailing 4.6 million forms to 3.1 million businesses, as well as conducting about 500,000 reminder phone calls and send- ing 4.2 million follow-up packages. Some believe the Census Bureau does too much already. "They waste a share of their budget on studies that no one actually uses," says Chris Edwards, an economist with the Cato Institute, who cites periodic surveys on such items as the total hog count in the U.S. to prove his point. "A lot ofthat could be done by the private sector." One of the most vocal critics of the proposed cuts is the U.S. Chamber of Commerce, a deficit hawk. "The cham- ber is in favor of getting the deficit under control, but you're not going to get there by gutting the statistics agencies," says the chamber's chief economist, Martin Regalia, who last July signed a letter in favor of fully funding the BEA. "The total amount of money saved is relatively small compared to the massive loss of in- formation it would lead to. It's like trying to balance your checkbook by buying cheaper checks." Some of the biggest users of the data are the in-house economists at big com- panies. "We are total data hogs," says Ellen Hughes-Cromwick, chief econo- mist at Ford Motor. The most recent GDP estimate released by the BEA showed that motor vehicle output made up half of the 2.2 percent i in GDP growth in the first quar- ter, giving Hughes-Cromwick a window into consumer spending habits that directly affect Ford's rev- enue. Says Hughes-Cromwick: "It's cru- cial to keep up with changes ... and you do that with good data. We're screwed without it." —Matthew Philips The bottom line Economists and business leaders are resisting GOP efforts to cut tunding to the agencies that gather economic data. T r a d e •''•***««fc. New Balance Wants Its Tariffs. Nike Doesn't • A trade deal could finish off athletic shoe manufacturing in the U.S. • "They're paying 46(t; an hour in Vietnam" For Brady Chapman, the answer to jump-starting the economy is simple: back the companies that manufacture in America. Chapman and his wife own the Snack Shack, a two-room restau- rant in Skowhegan, a town of 8,500 set amid the maple and pine trees of central Maine along a road locals call Moose Alley. New Balance Athletic Shoe, the last major manufacturer of athletic footwear in the U.S., is the larg- est employer in the area, where one factory after another has closed due to competition from imports. New Balance workers often stop by Snack Shack, especially on payday, for chicken tenders and clam strips. Like many in the town. Chapman wor- ries New Balance's U.S. factories will be put out of business by the proposed elimination of footwear tariffs under a free-trade deal, dubbed the Trans- Pacific Partnership, that President Barack Obama is negotiating with eight Pacific nations, including shoemaking colossus Vietnam. "If somehow these tariffs were not there, and you bring in all these imports, there's no way they can compete," says Chapman. "It \ would be devastating." A continent away in Bea- verton. Ore., sporting goods be- hemoth Nike is pushing for elimina- tion of the duties, pledging to create thousands of high-paying U.S. jobs, from designers to product engineers. Nike draws support from business groups and home-state lawmakers who say greater access to the Vietnamese market will provide opportunities for U.S. engineering, architecture, and fi- nancial-services companies. "The question comes down to, is one kind of jol3 more important than anoth- er?" says Erin Dobson, a Nike spokes- woman. "What are the jobs for the 21st century? They're not necessarily jobs that existed 30 years ago." The debate shows how tricky trade issues are for Obama, who says he wants to reward companies that manu- facture in the U.S. and at the same time craft a comprehensive free-trade agree- ment. "Nobody should pretend that this is easy," says Shaun Donnelly, a vice president of investment and finan- cial services with the U.S. Council for In- ternational Business. May 7 .-May 13,2012 Bloomberg BusinessWeek The Footwear Distributors and Retailers of America, which wants an end to the trade barriers, says tariffs for some types of shoes can run as high as 67.5 percent, and when the costs get passed on, they effectively triple the price of foreign-made shoes. New Balance, based in Boston, says the duties that help sustain its U.S. athletic footwear production are as high as 20 percent and asks that they be preserved. The 7 million pairs of shoes New Bal- ance produces each year in the U.S. make up only a quarter of U.S. sales, says Matthew LeBretton, director of public affairs. The rest are made in the U.K., China, Indonesia, and Vietnam. "If this is purely a business decision, then it's very clear that you make more profit by making shoes in Asia than in the United States," LeBretton says. "We aren't purists, but we are doing this for reasons that are other than financial impact. It's the right thing for us to do. We suffer as a country when we lose the ability to manufacture." He adds that 7 producing in the U.S. lets New Balance react faster to demand from U.S. stores - 'and helps those stores main- tain lower inventory. The company also says local workers maintain better qual- ity control than workers abroad. Keeping the tariffs is important be- cause most of New Balance's jobs are ^ ^ i n communities where there are few ^ l^^t other options for employment, says ^Senator Olympia Snowe (R-Me.). I "They're paying 46