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Economic correspondent Paul Solman reports on an American-born product hit hard by globalization: the surfboard. In Southern California, U.S.-based manufacturers fear they will soon be wiped out by competing, foreign companies due to discrepancies in labor costs and duty taxes.
And next: The surf's up for NewsHour economics correspondent Paul Solman — his subject tonight, how the monster waves of international trade and globalization threaten, yes, the surfboard industry here in the United States.
It's part of Paul's ongoing reporting: Making Sen$e of Financial News.
That's Steve and Barrie Boehne. They're the leading force in tandem. Look at the grace. Look at the style.
Now, what, you may ask, could a surfing star of the 1970s have to do with economics in 2013?
Isn't that great?
Well, Steve Boehne's life in the surf, which began at age 12 here in Dana Point, California, has involved shredding the waves, since 1958, on boards of his own invention. He's the founder and still maker and seller of legendary high end Infinity Surfboards.
STEVE BOEHNE, Infinity Surfboards:
Paul, you can use my board any time.
Even if his heavy lifting days are over.
This is a large board, isn't it?
Yes. Yes. This is bigger than normal. It's a stand-up surfboard. It's become popular in the last five years. And a lot of the older guys really embraced it at first, because it's a little bit easier. You're already standing up.
But these days, Boehne's got a bigger problem than gnarly knees.
95 percent of the boards being sold in the world weren't made by us in California, who started the surfboard industry. They're being made in other countries. And so my workers are competing for a job against a guy in another country who's making a 10th of his wages.
But that's the story in literally every manufacturing industry I can think of since I started reporting on TV on business in the 1970s.
Yes, it's true, but I know that every surfboard that comes into America comes in duty-free. And when I sell a surfboard to Australia, Japan, Europe, it's a 20 to 25 percent duty that they have to pay to get mine.
That's the twist to Steve Boehne's tale: not just cheap foreign competition due to lower wages and laxer environmental standards, but import taxes that other countries slap on his product to protect their domestic board makers.
The U.S., meanwhile, has moved toward freer trade by lifting all taxes on imported boards.
I had a dealer, a surf shop in Taiwan and he wanted to get American-made surfboards. And he sent me an e-mail: I want to get 50 surfboards.
OK, this is great. And we worked out the deal. And then I got a phone call from him. He says, I'm sorry. I can't get those boards. And I said, well, why not? He says, well, I have to pay a 50 percent duty when they come in, and that will increase the price so high, I can't buy them.
And then I realized that all the boards that come in from Taiwan come in duty-free in the United States, so is that fair?
Boehne's crew, with him just about every day for both work and play, agree, like, totally.
BRENT PASCOE, Infinity Surfboards:
It's really tough when even just up to Canada, the guys on the line is going, dude, I got to pay 20 percent tax on this thing when it comes in.
Brent Pascoe is a surfboard shaper who also handles Infinity's shipping.
Usually, they're pretty bummed out because they really want the board. It's a good board. And we offer it at a really good price on our end. But if you're already spending $1,200 to $1,500 dollars, 20 percent on top of that is a lot of money.
DAVE BOEHNE, Infinity Surfboards:
It happens on a daily basis, for sure.
Dave Boehne is Steve Boehne's son.
France, Japan, Spain, Australia, you know, you name it.
ANTHONY VELA, California:
And that's what has made some of the more established board manufacturers have to outsource and actually have some boards produced in China.
Where, says Anthony Vela, they not only get their American-branded board made for less, but can import it back to the U.S. duty-free, and thus the stock bottom line of businessmen hurt by free trade.
I just want an even playing field.
In fact, says economist Robert Lawrence, a trade enthusiast, most Americans are at least as skeptical of free trade as Steve Boehne.
ROBERT LAWRENCE, Harvard Kennedy School:
When you poll the American public, something like 70 percent say that trade is bad because it causes job loss and lower wages. Only about 30 percent of them say that trade is good because it leads to lower prices and gains for consumers.
PETER MORICI, Former Director of Economics, U.S. International Trade Commission: Low prices don't do you any good if you're unemployed. And a good number of our folks are unemployed because of our free trade policies.
Economist Peter Morici claims that protectionism alone costs the U.S. two million to three million jobs a year, a number Lawrence dismisses as nonsense, but, insists Morici:
Free trade is not working for the United States because of all these high tariffs and other protectionism in places like China, and Japan, and Germany. And, as a consequence, America is not growing and we would have five percent unemployment, instead of eight percent.
And for those who still have jobs, say skeptics like Morici, their wages have been shaved for decades.
Dave Naylor, who puts fiberglass on the boards, earns less, in real dollars, than he was making 20 years ago.
DAVE NAYLOR, Surfboard Maker:
They were paying me a process in the '90s about $15 or $17 dollars, and the same process now pays $18 and $20 dollars.
He'd need close to $30 dollars just to have kept pace with inflation.
Tom Sutherland, a 40-year veteran of the industry, has experienced stagnant wages since the '80s, when he made $50,000 dollars a year. Working 14-hour days, that's what he still makes. And he's fighting to hang on even to that.
TOM SUTHERLAND, Surfboard Maker:
I was offered to go over there to teach the Chinese — this was about four or five years ago — how to do my craft. They were going to pay me for a six-week time over there $15,000.
Chinese manufacturers offered you $15,000 dollars to teach their workers how to make boards?
I told them to pound sand. I'm not going to be a mercenary to go over there to sell my services so I get my throat cut over here in the next four or five years by training somebody to do what I do here. I have more sense.
But is trade really bad for America?
Gordon Hanson isn't just a trade economist. He's a surfer himself who learned the sport as a teenager ripping on an Infinity board built by Steve Boehne, with whose tariff plight he deeply sympathizes. But when it comes to trade itself, says Hanson:
GORDON HANSON, University of California, San Diego: I think what most economists would say, if you tally up in terms of what's happened to our national income as a result of free trade, it's larger.
Harvard's Lawrence is one such economist.
The fact is that a lot of people are being able to — because of free trade, are able to buy cheap surfboards, and this raises, ultimately, our standards of living.
But the standard of living for most Americans hasn't been rising for years now.
It's a big concern. Globalization is just one more item on the list which is contributing to widening opportunities and widening incomes in our economy.
So, then the perennial question: What is to be done? With the World Trade Organization talks stalled, in his State of the Union, the president pushed U.S. exports via regional trade agreements with both Asia and Europe.
PRESIDENT BARACK OBAMA:
To boost American exports, support American jobs and level the playing field in the growing markets of Asia, we intend to complete negotiations on a transpacific partnership. And, tonight, I'm announcing that we will launch talks on a comprehensive transatlantic trade and investment partnership with the European Union, because trade that is fair and free across the Atlantic supports millions of good-paying American jobs.
The approach the United States is taking is to try and create little clubs that you can only join if you adopt our rules.
But since the playing field for his product is at such a steep angle, says Steve Boehne, why not level it by playing tit-for-tat?
Match tariff for tariff.
Well, says Robert Lawrence, the result could go either way.
One possibility is that we raise our tariffs, and that persuades them that they ought to lower theirs. But a second possibility that I think we need to be concerned about is, we get into a trade war, in which we raise our tariffs on products, and then foreigners start to retaliate, and what we end up is cutting off all trade.
Meanwhile, at his own shop, Boehne himself sells cheap Chinese duty-free boards, with an Infinity label no less, along with his more expensive handcrafted product.
That's right. I have to play by the rules that are given to me, and to survive, to pay my rent at my retail store. And so we sell a lot of boards made out of the country. And so I'm conflicted, it's true.
As are Boehne's workers.
Yes, I do buy foreign goods. Everybody does. And I guess if we made everything here, things would be a lot more expensive because everybody wants a higher wage.
And that's the essence of the trade argument, says Gordon Hanson.
I think the surfboard industry really is a microcosm of globalization. We have winners and losers.
But he doesn't think the U.S. surfboard industry is doomed, because of a distinctly American advantage in global trade these days.
It's in marketing the lifestyle, you know? It's in coming up with the images, the aesthetic, as well as the actual technological designs that makes people want to be Southern Californians.
Southern Californians like surfer C.D. Kinley.
Yes, got some Vans, typical Vans, stay in socks, try to keep your warm, kind of look cooler, not your average white boring socks. So it's kind of cool.
Speaking of cooler, is it cooler to ride an American-made surfboard or an imported surfboard, say, from China?
Yes. Well, just to me personally, supporting a brand that's from California like Infinity, who's been making boards here for 50 years, that's a lot cooler for me.
And at least around here, that's how a lot of the cowabunga crowd still feels and still spends its money.
International trade and a call for reduced barriers were on the agenda this week, as Treasury Secretary Jack Lew met with top Chinese leaders in Beijing. No word yet if surfboards came up.
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