WALMART, TPP & SHOES: BETWEEN EARTH AND THE CLOUD

"Being able to import those shoes into the United States [tariff free] saves our moms money."

Sarah Thorn

Sarah Thorn is the Senior Director for Federal Government Relations at Walmart, and she was the second on the business panel at GBD's May 20 conference on Pacific Arrangements.  The order was significant in that the panel began with a presentation from Nick Giordano of the National Pork Producers Council and concluded with remarks from Chris Padilla of IBM.  The moderator, Joanne Thornton, had talked about the presentations going from the earth to the cloud, and Sarah Thorn picked up on that.  She said:

Today's opening quote comes from something Ms. Thorn said in the middle of her presentation.  Still, nothing could be more down to earth than shoes, so we shall start with her comments on those essentials and then move on.  After noting that food and clothing have the highest tariffs, Ms. Thorn zeroed in on shoes.  Shoes are one of the reasons why Walmart is such a strong supporter of TPP.  She explained:

"I don't know how many parents are in the room.  You have to go and buy those kids shoes all the time.  People are nodding.  They cost too much.  And the reason they cost too much is we have regressive tariffs on shoes.  ... The tariff on a kid's shoe is higher than a tariff on a fancy Italian loafer.  That's wrong.  It should be reversed. It's actually a legacy of

	Kids shoes, growing feet Shutterstock

the Smoot-Hawley Tariff Act.  And we have very, very high import penetration in shoes, very few shoe producers, and so shoes actually matter.  They matter for moms.  They matter for our customers. 

"And [the TPP] is one of the first trade agreements where we actually have an agreement with a country that knows how to produce shoes, and that's Vietnam.   So, being able to import those shoes into the United States saves our moms money.   And that's important for our customers, and it's important for, again, choice and opportunity."

Shoes also got their share of attention in the report the U.S. International Trade Commission published last month on TPP's "Likely Impact on the U.S. Economy and on Specific Sectors."  It notes, for example, that American-made shoes account for just 1.6 percent of U.S. footwear consumption; that Vietnam is the largest supplier of footwear to the U.S. among TPP countries and the second largest overall, after China.  (page 278). 

If TPP becomes law, all duties on imported footwear will be eliminated, some right away and some over a 12-year period. (page 280).

Of Groceries.  Ms. Thorn talked about products besides shoes and about exports as well as imports.  Walmart, with 2.1 million employees worldwide, operates in 28 markets, including 345 stores in Japan.  And outside the United States, most customers think of Walmart as a grocery story.  And it is.  In talking about Japan, Ms. Thorn said:

"We actually export a lot of pork to Japan.  And we export beef to Japan.  And we export cheese to Japan.  But it's not easy.   The tariffs are really, really high.  There's a pretty complex distribution system.  And as a result our customers in Japan and our 345 stores there pay a lot more for food than they need to.  The TPP will help lower the cost of goods.  It will lower the cost of food, which, I think, is actually an essential commodity for those customers.  It will increase choice for our customers and will enable our suppliers to have more access to that market."

And the Cloud.  As noted above, Walmart sees itself - and indeed global commerce - "at the intersection of digital and physical."  It was a point Ms. Thorn illustrated with several examples. 

Shea Butter from Africa was one of those.  We confess: we don't use it and had to look it up.  Shea butter is a cosmetic moisturizer.  It's made from the nut of the African shea tree, and the business is digital in more ways than one.  Yes, you can buy the product on-line from Walmart, but the key is that in some instances Walmart is really just providing a digital sales platform for women-owned business in Africa to reach American customers.

Blueberries from Peru was another example.  Ms. Thorn had just returned from Peru and talked a bit about some of the things Walmart is doing there:
"We have a global food sourcing hub there. And there is a really interesting story about blueberries.  Years ago, Peru was not a big blueberry producer, but they have a really good ecosystem for production of agriculture, and they've gone from - I don't know - a couple hundred million dollars of exports to a $5 billion export industry in asparagus, in grapes, in blueberries.  So, now they're the third largest producer of blueberries in Latin America. 

"And it's a great crop.  It's super food.  And so we've actually been investing in the blueberry production in Peru and bringing several hundred containers to the United States -- but also now thinking about - since we're now a global retailer in our global markets - how do we expand that production and bring those blueberries to places like Japan, where it's a novel fruit.  It's something that we want to do, ... we want to land those blueberries a lot cheaper for our customers.

 "That is sort of what you think of as the old value chain, but it's also great for economic development."

And Milk for China.  This is UHT milk, the stuff that doesn't need refrigeration, and Walmart worked with the Dairy Farmers of America to develop a UHT milk product for the Chinese market.  It's called California Gold Milk, and "it's going like gangbusters" in China, Ms. Thorn said. She explained that projects like that need functioning data systems.  Blueberries from Peru to Japan are another version of the same tale.  A good story that only works when the data is there to support it.  And when it comes to the digital economy, Ms. Thorn said, "The only place where we're actually trying to create new rules of the road that will enable business is trade agreements.  And actually, the TPP is further ahead than any other trade agreement."

One of the things that made Ms. Thorn's presentation so very credible is that it was not - even in the policy realm - just about TPP.  It was about all of elements necessary to making trade work.  The African women who make shea butter need to get their products to market, and so Ms. Thorn put in a plug for WTO members to ratify and implement the Trade Facilitation Agreement.  And as for TPP, it is important but it is not perfect.  TPP's apparel provisions, she said, are too restrictive to be useful for many companies.  Her larger point, however, was that TPP is a beginning, not an end.  But "TPP is a high standards agreement, and so we want to build on that in ... the APEC region and hopefully keep it as a model that continues to expand.

But first, she said, "We have to pass it."

The Business Panel is a reference to the audio tape of the panel with business speakers at the GBD May 20 conference on Pacific Arrangements.  Sarah Thorn was one of the speakers and the referenced audio tape was the source for today's quote. While this recording has not yet been posted on line, it is available to GBD members on request.

The ITC Report is a link to the text of the ITC's Congressionally mandated report on TPP, which was released on May 18, 2016.

Shea Butter is a page from the Walmart website with an ad for shea butter.
California Gold is an article from Dairy Farmers of America on this UHT milk product.

Toward TFA Ratification is a link to a page on the WTO website that deals with the ratification requirements that need to be met for the Trade Facilitation Agreement to enter into force.  Sri Lanka ratifies is a more recent article on the same issue.  At this point 81 WTO members have ratified.  108 are necessary for entry into force.