A Great Debate Over the Price Of a Pair of Honduran Socks
The humble cotton sock has become the center of an international trade dispute.
The United States decided on Jan. 18 that millions of pairs of duty-free socks imported from Honduras may be hit with a tariff. The ruling made the hosiery a symbol of the choices that politicians, workers and even towns face in a global economy.
Honduran imports jumped to more than 27 million dozen pairs last year from 10 million in 2005, after the Central American Free Trade Agreement passed. American workers have lost jobs as a result, the kind of issue Democratic presidential candidates use to criticize trade agreements. Still, feelings are mixed.
"This safeguard is not free," said Brenda Jacobs of Sidley Austin, a D.C. law firm representing clothing importers who are trying to keep costs down. "The question is: Which U.S. industry is going to get socked with increased duties on its exports to Honduras?" That's because, under the treaty, the United States would have to pay compensation for a tariff.
The fight began when Bush administration officials were trying to secure votes to pass the trade agreement with five Central American countries and the Dominican Republic. To win the support of Rep. Robert B. Aderholt, a Republican from Alabama with sock mills in his district, officials promised to monitor Honduran imports and impose a "textile safeguard measure" if warranted.
The flood of imports, which pushed Honduras ahead of China and just behind Pakistan, led to last month's announcement by the U.S. Committee for the Implementation of Textile Agreements. The interagency group, which supervises such accords at the Commerce Department, can impose up to a 13.5 percent tariff on an estimated $109 million worth of Honduran cotton sock shipments through the end of the year.
The Honduran government responded to the tariff threat in a Jan. 18 statement that said the agreement hasn't been in place long enough to make an argument for domestic safeguards. It also said the domestic industry hadn't formally asked for protection and that a tariff would "negatively" affect other American textile producers -- namely yarn mills supplying the increased production in Honduras.
As a condition of the 2005 agreement, Honduran socks come in duty-free as long as they are made of American yarns, a provision that doesn't apply to Asian countries.
Supporters of a tariff, including NC Sock Co. in Hickory, N.C., and Wigwam Mills in Sheboygan, Wis., fear they won't be able to withstand a continuing surge of imports from Honduras.
George Ruppe, president of Ruppe Hosiery in Kings Mountain, N.C., told the committee that he has cut capacity and employees to cope with imports even though the company has some of the latest knitting equipment.
Added Dennis Martin, president of NC Sock, "there are few changes we can make to adapt our operations and stay in business."
James Schollaert, a lobbyist in Arlington for American sock manufacturers that favor the tariff, placed much of the blame on Montreal-based Gildan Activewear, which is making socks in Honduras and exporting them to the United States.