August 28, 1985
Today we increasingly find ourselves confronted with demands for protectionist measures against foreign competition, but protectionism is both ineffective and extremely expensive. In fact, protectionism often does more harm than good to those it is designed to help. It is a crippling cure, far more dangerous than any economic illness. Thus, I am notifying the Congress today of my decision not to impose quotas on non-rubber footwear imports.
As President, it is my responsibility to take into account not only the effect of quotas on the shoe industry but also their broader impact on the overall economy. After an extensive review, I have determined that placing quotas on shoe imports would be detrimental to the national economic interest. While we support the principle of free trade, we must continue to insist of our trading partners that free trade also be fair trade. In that regard, I have instructed our Trade Representative to take action to initiate investigations under section 301 of the Trade Act of 1974, as amended, to root out any unfair trade practices that may be harming U.S. interests.
With respect to the footwear industry, the Council of Economic Advisers estimates that quotas on non-rubber shoe imports would cost the American consumer almost $3 billion. Low-income consumers would be particularly hard hit as shoe prices rose and less expensive imports were kept off the market. Instead of spending billions of consumers' dollars to create temporary jobs, I am directing the Secretary of Labor, through the Job Training Partnership Act, to develop a plan to retrain unemployed workers in the shoe industry for real and lasting employment in other areas of the economy.
There is also no reason to believe that quotas would help the industry become more competitive. Between 1977 and 1981, U.S. footwear manufacturers received protection from foreign imports, but emerged from that period even more vulnerable to international competition than before. In fact, while unprotected by quotas, the shoe industry has begun to show positive signs of adjustment. Producers have invested in state-of-the-art manufacturing equipment, modernizing their operations, and diversifying into profitable retail operations.
While bringing no lasting benefit to the shoe industry, quotas or other protectionist measures would do serious injury to the overall economy. The quotas proposed by the International Trade Commission could cost over $2 billion in compensatory claims under GATT and could invite retaliation from our trading partners. The result would be an immediate and significant loss of American jobs and a dangerous step down the road to a trade war, a war we fought in 1930 with the infamous Smoot-Hawley tariffs and lost. Our economy is truly interwoven with those of our trading partners. If we cut the threads that hold us together, we injure ourselves as well. If our trading partners cannot sell shoes in the United States, many will not then be able to buy U.S. exports. That would mean more American jobs lost. Thus, we find that the true price of protectionism is very high indeed. In order to save a few temporary jobs, we will be throwing many other Americans out of work, costing consumers billions of dollars, further weakening the shoe industry, and seriously damaging relations with our trading partners.
The United States can set an example to other countries. We must live according to our principles and continue to promote our prosperity and the prosperity of our trading partners by ensuring that the world trading system remains open, free, and, above all, fair.
Note: Clayton Yeutter, United States Trade Representative, read the President's statement at 2 p.m. to reporters in the Briefing Room at the White House.