For years there’s been a longstanding debate as to whether import tariffs are useful in either saving or creating American jobs. In my mind the debate’s been settled; simple logic tells me that import tariffs actually do both.
Import tariffs raise the access fee for foreign producers to participate in the American market and grab their own share. It’s like a poker game. If you’re sitting at the table and want to share in the same pot, you have to ante-up the same amount. Makes a lot of sense and it does when applied to tariffs, too. Americans don’t ante-up two dollars while Mexicans ante-up two pesos. That wouldn’t be fair. In this case, the ‘pot’ is the lucrative U.S. market – everyone wants to sell to us.
Instead of lowering taxes of American producers to make them more competitive with foreign companies (which is revenue-negative), we should be raising taxes on foreign producers (which is revenue-positive). In other words, do not lower our standards to theirs; raise their standards to ours.
Recently, I met Harry Kazazian, CEO of Exxel Outdoors, whose company makes sleeping bags under the brand names Suisse Sport, American Trails, Master Sportsman, and under licensing agreements with Disney, Marvel Entertainment and Sanrio (Hello Kitty). Exxel currently has a 300,000-square-foot facility in Haleyville, Ala., which the company bought from Brunswick when it was slated for closure in 2000. Exxel produces about two million sleeping bags a year.
Harry told me, “We strive for Exxel Outdoors to be a role model for other companies who are working to revive manufacturing in the United States and create job growth here.”
Starting in 2007, Exxel officials added approximately 20 percent more American jobs as they began closing down operations in China with plans to add even more American jobs in 2010 and 2011.
But in October 2009, Exxel discovered there was 5,000 percent surge in sleeping bags coming into America from Bangladesh, which unlike China, enjoyed duty-free access to the U.S. market. Bangladesh gets its raw materials from China – also duty free, and was escaping a nine percent import tariff back then.
Under the U.S. Generalized System of Preferences (GSP) Program, textiles are generally exempt from GSP duty-free treatment. But back in 2009, sleeping bags did not qualify for this exemption – since there was a loophole that did not treat sleeping bags as textiles. Sleeping bags had been removed from the GSP exempt products list in 1992.
In November 2009, Exxel met with U.S. Trade Representative (USTR) and the Department of Commerce. Exxel filed a petition with the administration in January 2010, which was denied in June 2010. Bangladesh only held a one percent share of the U.S. sleeping bag market. By late 2010, Bangladesh held a seven percent share.
But in December 2011, President Obama determined certain non-down sleeping bags would be removed from eligibility for duty-free treatment under the GSP program because these products are “import-sensitive in the context of GSP.” Republican Alabama Sen. Jeff Sessions called the decision to remove the sleeping bags from duty-free treatment a just outcome.
Exxel’s American-manufactured sleeping bags are sold at mass retailers and sporting goods chains across the country.
Here’s the proof of my point – that import tariffs both save or create American jobs. The nine percent tariff on Chinese sleeping bags affords some level of protection. This has helped Exxel go for a long-term investment strategy and create the most efficient sleeping bag factory in the world in Alabama, where workers can actually produce a sleeping bag at a lower cost than bringing one in from China.
So with this example, let’s take with us the knowledge, once and for all, that import tariffs have their place in putting Americans, who are the only workers that pay taxes to America, back to work.