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June 20, 2019

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American businesses oppose tariff hikes, stress China’s pivotal role in supply chain

US business and industry representatives on Monday voiced their frustration over and opposition to a proposed new round of tariffs on Chinese imports, sharing stories on how Washington’s trade protectionism would backfire.

They were attending the first of a series of public hearings, held by the Office of the US Trade Representative (USTR), inside the US International Trade Commission Building, regarding proposed additional tariffs of up to 25 percent on US$300 billion in goods from China.

Speaking to federal trade officials and Xinhua, witnesses made clear that they don’t want tariff hikes on Chinese imports critical to their business operations and jobs, and that it is difficult for them to move production out of China or find alternative sources, while warning that US companies, industries, and eventually families and consumers would pay the price.

Higher costs

Brent Cleaveland, executive director of the US Fashion Jewelry and Accessories Trade Association, the first witness at Monday’s hearing, said that the industries, which moved production to China in the 1980s in order to provide greater value to the domestic market, have relied heavily on Chinese imports, adding that the proposed tariff increases would really threaten US businesses and jobs.

The association estimated that tens of thousands of employees of its members would be hurt by the increase of tariffs that would lead to higher costs, decreased margins, and declines in sales.

“There is a real fear that the tariffs would result in employees losing their jobs and American businesses closing their doors,” Cleaveland said.

Overall, the new tariffs are designed to target nearly all consumer products, including apparel and shoes, electronic gadgets, TV sets and sporting goods, covering the remaining US trade with China, which has already been hit by several rounds of tariffs despite wide opposition. China has put in place retaliatory measures.

Juvenile products, including car seats, baby gates, and strollers, were also in Washington’s latest tariff list but they “should be available to America’s families at the lowest possible cost,” said Lisa Trofe, managing director of the nation’s Juvenile Products Manufacturers Association.

The hearing came less than a week after more than 600 US companies and trade associations, including some of the nation’s biggest retailers, sent a letter to the White House, saying that tariffs are taking quite a toll on US families, jobs and the economy. Kerry Stackpole, CEO and executive director of Plumbing Manufacturers International, told Xinhua on the sidelines of Monday’s hearing that previous tariffs have already increased the cost of buying a home in the United States by about US$9,000, adding that every thousand-dollar increase will disqualify about 127,000 families from being able to buy one.

When asked by the panelists whether they could somehow shift supply chains out of China, many representatives at the hearing didn’t refrain from lecturing the officials about the extreme difficulty, and in some cases, impossibility.

“The truth of the matter is we’ve been trying to get out of China for years, but they just seem to do it better than anybody else,” Rick Helfenbein, president and CEO of the American Apparel and Footwear Association, said in response to a question from the hearing’s committee.

Nowhere to go

“There are limited places ... we can go,” Helfenbein said, adding that the next possible locations following China — Vietnam, India, Indonesia and Bangladesh — are simply not cost-effective.

For Jean Kolloff, CEO and founder of Quinn Apparel + QI Cashmere, it’s not an option to move the supply chain anywhere else.

Her designer company only sources out of Inner Mongolia in northwestern China because the Alashan breed of goat, from which premium quality fiber comes from, is indigenous to that region.

But what draws Kolloff to China is not only the specific breed of goat. “Quality is controlled and the best spinners and dyers of cashmere raw material, yarn, are located in that part of the country,” she told Xinhua after the testimony.

Nicholas Lardy, a senior fellow at the Peterson Institute for International Economics, told Xinhua recently that “I am prepared to believe that a lot of companies are exploring alternatives to producing elsewhere. But I don’t see that there’s a big uptick in companies actually departing.”

Lardy, who has written several books on the Chinese economy, said that it would probably be “not so smart” for companies to massively move supply chains away from China, because it would be difficult to find a place that could “absorb that big an increase,” whether it’s logistics or labor supply, or anything else.

The White House has been using tariffs to address what it has claimed are China’s unfair trade practices related to technology transfer, intellectual property and innovation, based on so-called findings in the USTR’s investigation under Section 301 of the nation’s Trade Act of 1974, a one-sided tool for Washington to serve its own interests in dealing with trade disputes.

Tariffs on US$250 billion in Chinese imports are currently in effect under a Section 301 trade action.

Many witnesses on Monday said that the tariffs were misplaced as there is no high-end technology in their businesses and industries.

In his testimony, Marc Schneider of US fashion house Kenneth Cole Productions Inc said that the proposed tariffs on footwear products won’t help address the administration’s concern, adding that the manufacturing process of those products involves few, if any, trade secrets, technologies or intellectual property that are forcibly shared.

Stackpole, whose organization represents companies that altogether supply 90 percent of all plumbing products to American households, stressed that plumbing products are not sophisticated products, adding that additional tariffs would erode US brands’ global competitiveness.

The authors are Xinhua writers.


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