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Shoe Company New Balance Says US Gov't Basically Offered It A Bribe To Support TPP

from the wow dept

Tue, Apr 12th 2016 10:40am — Mike Masnick

We've mostly focused on the impact of the TPP and trade deals on the internet (and also on national sovereignty), because that's the kind of stuff that interests us most around here. We've spent a lot less time looking at the more traditional free trade arguments, in part because that's not nearly as controversial, and in part because -- despite claims to the contrary -- there really aren't that many tariff-related barriers that make a big difference any more. It's generally good to reduce such tariffs, and in response you see the typical response from firms based on whether or not they benefit from those reduced tariffs. The "benefits" of free trade tend to be focused on the companies looking to expand into those markets where tariffs are being lowered or abandoned -- and not so much for companies competing against products from those same countries. Frankly, I find arguments that the companies who freak out about trade deals because it will mean more competition against them a bit tiresome, because I tend to believe competition is a good thing for innovation.

However, the Boston Globe has quite a story about one such company, the sneaker company New Balance, which was quite worried about how the TPP would increase competition from shoemakers in Vietnam. Again, I find those concerns to be overblown, but the next part of the story is where it gets interesting: New Balance is now claiming that it stopped publicly complaining about the TPP after the US government more or less promised it a big government contract, which never came through:

After several years of resistance to the Trans-Pacific Partnership, a pact aimed at making it easier to conduct trade among the United States and 11 other countries, the Boston company had gone quiet last year. New Balance officials say one big reason is that they were told the Department of Defense would give them serious consideration for a contract to outfit recruits with athletic shoes.

But no order has been placed, and New Balance officials say the Pentagon is intentionally delaying any purchase.

New Balance is reviving its fight against the trade deal...

The US government, of course, is insisting the issue of a contract is entirely separate from the TPP, but New Balance said an explicit offer was made. The company notes that while most of the uniform worn by the military is American made, there has always been an exception for sneakers because so few were actually fully made in the US. New Balance apparently decided to change that in hopes of getting a government contract, and the administration more or less said that this would work if New Balance shut up about opposing the TPP:

In 2014, the Pentagon relented. With competition among US manufacturers, officials said they were ready to consider domestically made shoes.

LeBretton said a representative for the Obama administration then asked New Balance to accept a compromise version of the trade deal, partly in exchange for a pledge of help getting the Department the Defense to expedite the purchase of US-made shoes.

The Globe claims that the Defense Department says the reason that it didn't give New Balance a deal was because its shoes weren't durable or cheap enough, but even if that's true, the very idea that the government more or less tried to buy off the company's opposition to the TPP seems highly questionable.

Of course, I wonder, should the TPP get ratified and should the Defense Department then agree that it will only buy American made sneakers... one wonders if Vietnamese sneaker makers would then have an ISDS corporate sovereignty case against the US government? After all, it would be harming "future profits" that the Vietnamese sneaker-makers would have been expecting, and a "buy American" rule could clearly be seen as a non-tariff trade barrier to foreign goods, no?

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Filed Under: competition, defense department, shoes, sneakers, tariffs, tpp, ustr
Companies: new balance

34 Comments

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Anonymous Coward, 12 Apr 2016 @ 10:57am

Not surprising, kinda confirms what I figured the govt did to get support for a horrendous deal like the TPP. Just makes me wonder how many of the other supporters they also made deals with...probably a lot that didn't already have very lucrative govt contracts and those just got even more lucrative.
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Coyne Tibbets (profile), 12 Apr 2016 @ 11:01am

That's a new balance all right
It's interesting to see the lengths that USTR will take to complete a trade agreement.

I just wish the crier wasn't a co-conspirator who accepted a promise of a bribe; and, finding they were swindled, has switched to blackmail.

Gives me a funny feeling in my reasonable doubt.
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Anonymous Coward, 12 Apr 2016 @ 11:04am

Shocked!
What? There's bribery going on here? I'm shocked, I tell you, shocked!

Next I suppose the government will begin classifying their bribes and putting gag orders on them, if they aren't already. (We know how the administration hates leaks and whistle blowers.)
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Anonymous Coward, 12 Apr 2016 @ 11:13am

Re:
Just makes me wonder how many of the other supporters they also made deals with...

Those deals are probably "classified".
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Brad, 12 Apr 2016 @ 11:19am

Military Acquisition Exception to Trade Deals?
I'd be surprised if the trade deals don't contain an exception for domestic military procurement. Anyone know?
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Aludra, 12 Apr 2016 @ 11:22am

Chop chop
So, the USTR wrote a bribery check that the DOD wouldn't cover? I bet the USTR is pushing the administration to chop a few heads at the Pentagon about now.
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John Fenderson (profile), 12 Apr 2016 @ 11:23am

Hard to feel sorry for New Balance
You lie down with dogs, you get up with fleas.
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Anonymous Coward, 12 Apr 2016 @ 11:46am

Bribery hypocrisy
Any bets how aggressively the administration would have acted if the deal had been proposed in reverse? That is, if a New Balance official had suggested the government could get a really good deal on a contract if certain officials started parroting the company line at trade meetings? Apparently it is bribery when you buy off the government, but perfectly legal when the government buys you off.
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afn29129 (profile), 12 Apr 2016 @ 11:50am

We're hearing about it now because?
So we're hearing about it now because the deal fell through and not because the offer was made. It make one think that wouldn't of been a news story had the deal been properly consummated.
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Darrin Silverman, 12 Apr 2016 @ 12:31pm

The TPP would force other countries that take are genetically modified products and beef filled with bovine growth hormone. In exchange we would have to take other countries products like Canada who Slaughter horses for food in Vietnam who eats dogs. Vietnam could try selling us dog meat and if we didn't accept it they could sue us in isds clause. And these WTO courts are made up of corporate attorneys who 95% of the time side with the company losing money over the country.
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Andy, 12 Apr 2016 @ 12:37pm

Soverenty claim
I would love it if they sued the American government under tpp rules and i would hope that it would be a few billion dollars payment to the company, yes it is taxpayer money but i can guarantee that American companies are going to use this regulation to suck trillions from various countries who do not want American businesses due to health and safety reasons.
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Anonymous Coward, 12 Apr 2016 @ 12:38pm

TPP Wet Dream
"Vietnamese sneaker makers would then have an ISDS corporate sovereignty case against the US government..."

This.
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Dave Cortright (profile), 12 Apr 2016 @ 1:16pm

So who in the government is getting indicted for bribery?
No one? Well that is just shocking.
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Loki, 12 Apr 2016 @ 3:04pm

Actually, given the government's propensity, especially among the military, for spend upward several hundred times what something costs, the ISDS provisions of TPP would largely be irrelevant to them. Paying multiple companies for the same shoe wouldn't matter as long as they could claim the shoes were American Made.
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freakanatcha (profile), 12 Apr 2016 @ 3:35pm

New Balance - TPP
Correct me if I get this wrong. The U.S. trade reps shit all over U.S. companies like New Balance, but gave a fat kiss on the lips to pharma (OK, they pulled back a little, but still). Isn't pharma the same industry that bolts to tax havens because they don't care to pay U.S. taxes?
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aidian, 12 Apr 2016 @ 4:42pm

TPP shows some big tariffs still exist in agricultures....
...specifically apples and other tree fruit, which are big big deal in Washington (state). Right now there are significant tariffs on American exports into many pacific rim countries. Getting those tariffs out of the way would matter a lot to the economy here.

That said, still not worth it, for two reasons:
1) The TPP is terrible for so many reasons I won't belabor here.

2) The deal just isn't very good. At the risk of sounding like Donald Trump, the USTR didn't do a good job negotiating.

Too motivated to make a deal, the U.S. negotiators didn't have the leverage they should.

Check out the remaining tariffs, their slow phase out and the vauge wording about when they'll finally be abolished: http://www.yakimaherald.com/news/local/local-tree-fruit-officials-waiting-for-trans-pacific-partners hip-specifics/article_cf4b6cb2-7ba9-11e5-a07e-332cb3762d0e.html
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Anonymous Coward, 12 Apr 2016 @ 5:39pm

Mike Masnick just hates it when copyright law is enforced. Bawk bawk! : )
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Anonymous Coward, 12 Apr 2016 @ 5:41pm

New Balance lost my business...
Since the early 1990's most of my shoes have been New Balance (NB) because they fit my hard to fit feet. I noticed a couple of years ago their prices starting going up a fair percent, from around $85 for the shoes I used to buy up toward $150, and their designs morphed.
The money issue sucks, but when recently tried on several new pairs in on of their stores, they have probably lost me as a customer forever. Like around 1967 or 1968 when I took a bite into a Twinkie, and discovered the cake was no longer made with milk, but with casein. And then in 1975 when I took my next bite of a Twinkie and discovered the cream filling no longer contained any milk or cream or dairy product at all.
NB has abandoned me for some reason. To heck with Vietnam.
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Anonymous Coward, 12 Apr 2016 @ 5:57pm

TPP? Why bother when the WTO is right there right now...
...and a "buy American" rule could clearly be seen as a non-tariff trade barrier to foreign goods, no?

The US has already gone to the WTO to block an Indian solar power plant because of "buy local" rules. The precedent is clear and established.
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Whatever (profile), 12 Apr 2016 @ 6:39pm

So wait, these guys are going public bitching that their bribe hasn't been paid yet? Classic stupidity!
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Anonymous Coward, 12 Apr 2016 @ 7:51pm

Down, down, wages are down.
Grab a bargain Corporations, we now have the TPP wages drop so you too can save big dollars at the factory door.

How could the local company compete on price when they pay $5 per hour, not $5 per day.

But don't worry folks, soon we too will be paid an exciting $5 per day when the TPP goes through.

What an exciting time it is to be a worker!
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Ninja (profile), 13 Apr 2016 @ 3:24am

Some people could use a shoe or two to eat I've heard. No need for the Govt to earn money, it's just that New Balance is in the wrong business.
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Anonymous Coward, 13 Apr 2016 @ 4:54am

Re:
Thanks for confirming that TPP is SOPA painted another color.
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Craig Welch (profile), 13 Apr 2016 @ 5:26am

Re:
You seem to be conflating the TPP with the WTO.

"corporate attorneys who 95% of the time side with the company losing money over the country."

No they don't. I suggest you look up the freely available statistics on win/loss ratios for corporations and states.
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Anonymous Coward, 13 Apr 2016 @ 7:02am

Re: Bribery hypocrisy
The only reason the government wrote TPP, or at least the IP aspects of it, and is pushing for it is exactly because corporations have bought out the government so what are you talking about?
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Wendy Cockcroft, 13 Apr 2016 @ 7:50am

Re: TPP Wet Dream
LOL @ this in principle, but now imagine the Vietnamese trying to enforce the judgement.

This FTA is rigged in favour of the biggest players. The idea that Vietnam has the same rights and the same chances of winning in an ISDS tribunal is just that; an idea. The truth is, they wouldn't stand a chance and if they won I'd hate to imagine the repercussions on them.
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Mikey, 13 Apr 2016 @ 8:06am

Re: Hard to feel sorry for New Balance
Just to be clear, the Globe added its typical bias into their article. The New Balance CEO said, ""There was no quid pro quo deal. We didn't want an earmark contract, we wanted to compete for a piece of business we're very confident we can win."
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John Fenderson (profile), 13 Apr 2016 @ 8:31am

Re: Re: Hard to feel sorry for New Balance
Someone should tell that to New Balance's public affairs VP:

“We swallowed the poison pill that is TPP so we could have a chance to bid on these contracts,” said Matt LeBretton, New Balance’s vice president of public affairs. “We were assured this would be a top-down approach at the Department of Defense if we agreed to either support or remain neutral on TPP. [But] the chances of the Department of Defense buying shoes that are made in the USA are slim to none while Obama is president.”
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John Fenderson (profile), 13 Apr 2016 @ 8:35am

Re: Re: Hard to feel sorry for New Balance
Oh, I see our disconnect! You're saying that because New Balance offered a bribe in exchange for a "chance to compete" rather than for a guaranteed contract, then it's all good.

I disagree. They're both the same thing. Systemic corruption in action.
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Anonymous Coward, 13 Apr 2016 @ 9:35am

Everyone is so distracted with FBI vs Encryption that they forget about the TPP.
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nasch (profile), 13 Apr 2016 @ 11:53am

Re: New Balance - TPP
Isn't pharma the same industry that bolts to tax havens because they don't care to pay U.S. taxes?

Along with basically all the other industries.
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Anonymous Coward, 13 Apr 2016 @ 4:04pm

M. Masnick,
I'm not an avid reader, I've just been taken to your article from reddit, but your understanding of economy seems to be the one of a preschooler. You "find these concerns to be overblown" and you see competition as a good thing. So you won't mind American employees of US based factories working for the same salary as an Asian worker or simply losing their jobs because the company can't stay competitive with another country with a different economy and a workplace based on exploitation? With articles this good, there's no chance of somebody with a basic knowledge of the English language to replace you for a fraction of the cost...
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Coyne Tibbets (profile), 24 Apr 2016 @ 12:21am

Re: Re: Hard to feel sorry for New Balance
They gave value (support for TPP) in exchange for value (right to compete). The right to compete was supposed to be unconditional (even though winning was conditional) and one party was official, so that's a bribe.
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Jack Elliott, 15 May 2016 @ 6:43pm

Kill Them
That corruption and oppression, impoverishment, and murdering of this government needs to be made to stop by the only means possible, and that is xguerilla Warfare.
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