Growing Washington Retailers’ Competitiveness

Kent-based outdoor apparel retailer REI is committed to protecting the great outdoors. Since 1976 REI has donated over $77 million non-profit partners who care for the environment,[1] and more recently it has established a sustainability partnership with 66 of the brands it carries.[2]  Most impressively, all REI stores, distribution centers, and headquarters are powered by 100% renewable energy thanks to their use of solar panels and purchase of renewable energy certificates.[3]

By using a slew of advanced data-gathering tools, Seattle-based athletics retailer Brooks Running uses technology to create the best-researched and engineered running shoes on the market. Brooks is also a leader in environmental sustainability, and rigorously evaluates their greenhouse gas emissions and seeks innovative ways to reduce them. Brooks is a leader in Seattle’s Deep Green Building Pilot program, an initiative designed to push companies to meet exacting sustainability and energy efficiency standards.[4] Just as important, Brooks Running scored the best of all major shoes manufacturers on an ethical manufacture study,[5] so you can truly feel good about owning a pair of their shoes.

Washington-based retailers like REI and Brooks Running are well-known and loved across the country, and are leading the way in fields like sustainability and retail innovation. Washington state retailers’ success depends on their ability to competitively export products while leveraging global supply chains to create affordable goods that can be sold across the country and the world. High tariffs on apparel imports, e-commerce barriers, and other trade obstacles reduce our retailers’ competitiveness. We need to create an environment that allows retailers to thrive so that they can continue to provide jobs and bring economic growth to our local communities.

Retailers large and small provide more than just sales associates jobs; they bring an array of careers to Washington state. Many of these positions are high-paying and require a high level-of training or education such as jobs in marketing, merchandising, finance, design, logistics, testing, research and development and other fields.

Tariffs on apparel are one of the hurdles that impede our retailers’ success. Protectionist leftovers from 1930s, these tariffs ineffectively tried to protect American industries during a time when our apparel manufacturing sector was much larger.[6] But now that approximately 99% of clothes and shoes purchased by Americans are produced abroad, these tariffs only serve to drive up prices for local businesses and consumers. These tariffs are not small, and are very tough. For instance, a luxury product like a cashmere sweater only faces a 4% tariff, while necessities like affordable sweaters made from synthetic fibers are taxed at 32%,[7] weather-resistant  children’s shoes incur a 48% tariff, and children’s sneakers are taxed at a jaw-dropping 65% or more.[8] This practice hits low-income households hardest, reducing their access to basics like shoes or warm clothes.[9]

Washington state retailers were among early e-commerce pioneers, and have rightly become leaders in the fields of online marketing and trade, but this new frontier has the same trade barriers as traditional commerce, as well as its own unique set of hurdles. Limitations on a free and open internet prevent our retailers from reaching global customers, and thus maximizing their potential. Requirements to build data centers within every country a company wants to do business, instead of allowing free flows of data across borders, is inefficient and cost prohibitive for large and small U.S. retailers alike. Low de minimis thresholds (the purchase price above which customers must pay duties) reduces the competitiveness of Washington’s online retailers. For example, while U.S. customers only have to pay duties for orders over $800, Canadian customers must pay duties for purchases above only $20. In addition, foreign internet taxation on online orders further erodes U.S. e-commerce competitiveness.

Inefficient customs procedures are another obstacle in the path of our retailers. Goods can sit on docks, in customs offices, or similar holding areas for hours or days, slowing down the flow of goods, causing delays and raising costs for all parties involved. If our retailers are shipping perishable goods like Washington-grown crops, then these inefficiencies can ruin entire shipments.

There are a number of policy changes that can protect our retailers from these problems. First, we should to prioritize e-commerce in trade agreements and WTO rules. Online shopping is becoming more common every day, and our trade agreements need to reflect this global consumer shift. Similarly, we must ensure the free flow of data across borders. Washington retailers depend upon the internet to buy and sell their products via e-commerce and every online purchase requires the transfer of electronic information. Second, we need to lower import tariffs on many consumer goods. With local retailers and lower income consumers hardest hit by high tariffs, it’s vital that we break down these barriers. We can also boost the competitiveness of small and medium retail exporters by increasing the de minimis threshold for the low-value and low-risk packages that they typically buy and sell.

Washington’s dynamic retail companies are pillars of our thriving trade-based economy that make Washington state so successful. By supporting our retailers through policies that help them compete globally, hire more local talent, and continue to lead on retail and sustainability efforts, we can ensure our state is a global hub for trade and innovation.

 

By Jon Okun

[1] https://www.rei.com/content/dam/documents/pdf/Stewardship%20Reports/REIStewardship2016.pdf

[2] https://www.rei.com/content/dam/documents/pdf/Stewardship%20Reports/REIStewardship2016.pdf

[3] http://newsroom.rei.com/news/rei-now-powered-by-renewable-energy.htm

[4] http://www.brooksrunning.com/en_us/meet-brooks/running-responsibly

[5] https://www.choice.com.au/health-and-body/diet-and-fitness/sportswear-and-shoes/articles/shoe-factory-working-conditions

[6] https://taxfoundation.org/us-has-shoe-tax/

[7] https://www.theatlantic.com/daily-dish/archive/2010/06/how-tariffs-hurt-the-poor/186277/

[8] https://qz.com/859628/your-nike-sneakers-are-a-case-study-in-why-trumps-protectionist-america-first-trade-policy-is-nonsense/

[9] http://www.cnbc.com/2016/12/07/trump-tariffs-countries-and-products-that-pay-the-ighest-us-tariffs.html

Ashley Dutta
ashleyd@wcit.org
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