Why Obama picked Nike to pitch trade deal

PORTLAND, OR - MARCH 19: A detail view of Nike basketball shoes worn by a Arizona Wildcats player as the Arizona Wildcats play the Texas Southern Tigers during the second round of the 2015 NCAA Men's Basketball Tournament at Moda Center on March 19, 2015 in Portland, Oregon. (Photo by Stephen Dunn/Getty Images)
Stephen Dunn, Getty Images

In 1998, Nike's CEO at the time, Phil Knight, acknowledged in a speech that the company's reputation had deteriorated so badly that its products had "become synonymous with slave wages, forced overtime and arbitrary abuse," and he promised change.

Fast forward 17 years, and now, President Obama is coming to the company's Beaverton, Oregon headquarters Friday to hold Nike up as an example of free trade's potential in the U.S., the centerpiece of his attempt to sell the Trans-Pacific Partnership (TPP). It's a trade agreement that has divided his own party. Supporters of the agreement - the president, many Republicans, and some Democrats - say it will open up new markets for U.S. exports, which would translate into economic growth and more jobs at home. Other Democrats believe the agreement would ship more American jobs overseas, hurt wages at home, and harm the environment.

Critics are flummoxed by the president's choice of the sports apparel company to address concerns about TPP, but supporters call it a bold move that showcases what can happen when U.S. companies commit to raising labor standards abroad.

"It's almost like throwing people a curveball - why would you ever go there given their reputation?" Brown University Professor Richard Locke, who studies labor and environmental conditions in global supply chains and has watched Nike for years, told CBS News. But he concedes the company has come a long way since its disgrace in the 1990s.

"Nike has really worked hard in improving its environmental and labor conditions among its suppliers," he said. And, he added, they have generated high value jobs in the U.S. like design jobs at the company's Oregon headquarters.

Between 2012 and 2014 the company added 2,000 jobs, fulfilling an agreement it made with the state to hire at least 500 full time-equivalent employees as part of its headquarters expansion. The company employs more than 26,000 people in the U.S., including more than 8,500 in Oregon.

The company estimates its annual economic impact on the state of Oregon at more than $2.5 billion.

Critics complain that the kinds of jobs being added in the U.S. require advanced degrees - they're not jobs manufacturing shoes domestically. And they add that labor standards in previous trade agreements like the North American Free Trade Agreement (NAFTA) have not actually improved conditions for foreign workers.

White House spokesman Josh Earnest told reporters Wednesday that the president would use the event "to illustrate how a responsible trade agreement that includes enforceable labor and environmental standards would strongly benefit middle-class families and the American economy." He said the key difference between TPP and previous trade agreements is that this deal contains provisions "that would actually be enforceable."

"It's a very gutsy choice by the president," Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics and expert on international trade, told CBS News. "Nike has been a pioneer firm in checking out its suppliers and they did it way before this became a hot button issue."

Nike started trying to fix its work practices in 1992 by establishing a code of conduct for its suppliers, according to a 2012 article in the Economist. But it notes that it wasn't until 2006, when Nike for the first time listed "details of all the factories in its supply chain" that working conditions in its factories improved. "When Nike opened up it was a conscious effort to challenge industry norms," the Economist wrote.

Since nearly all shoe manufacturing has already moved abroad, Hufbauer pointed out that one advantage of the president's choice is that he isn't talking about trade in an industry that is likely to suffer job losses after yet another free trade agreement. Instead, he can talk about the benefits of lowering import tariffs on goods that American consumers want, but are currently produced abroad.

Lori Wallach, the director of Public Citizen's Global Trade Watch, disputed the idea lowered tariffs would lead to a lower price on Nike sneakers for American citizens because buyers are already willing to pay high prices. Moreover, she said, Nike workers overseas still wouldn't earn enough to purchase the products they help make, so it's not a company that would enjoy greater market access overseas as a result of a free trade deal.

"It's a pretty perverse place to go to sell a trade agreement that's being attacked because it will make it easier to offshore production jobs and lower our wages," she told CBS News. "Nike is a company that has made, that last year alone had 30 billion dollars in revenue based on not hiring U.S. workers and producing offshore in very low wage venues where the workers can't make enough to buy the shoes they make much less any U.S. export that the TPP might otherwise ostensibly make more lucrative in Asia."

"Nike is the symbol of what most Americans are worried for their future under TPP," she added.

Robert Scott, the director of trade and manufacturing policy research at the Economic Policy Institute, which focuses on low- and middle-income workers, also pointed to Nike's role as a leader in outsourcing as the reason for his dismay at Mr. Obama's speech locale.

"What the president is going to do is visiting and promoting and talking to the winners," he said. Scott objects to Nike because it has hundreds of thousands of overseas workers employed by its suppliers, and a comparably tiny workforce based in America. "Is that what a Democratic president should be doing? I don't think so," he said.

He says that some of the company's suppliers still struggle to meet the labor standards Nike has set, showing the limit to American companies' ability to raise labor standards around the world as TPP backers promise it will.

"Things are far from perfect," Locke said. "But you can really see how with the right kinds of investments that they've made and changes that their own policies things have really improved."

Nike itself is an enthusiastic backer of the TPP, saying that the agreement will allow the company to innovate, expand its business and drive economic growth.

"Nike supports TPP because it will open global markets and enhance Nike's ability to compete," the company said in a statement. It said its U.S. employees, "depend on free trade and our ability to reach athletes in the 190 countries around the world in which we sell our product."

  • Rebecca Kaplan

    Rebecca Kaplan is a political reporter for