The U.S. Department of Transportation hails Buy America policies as drivers of economic growth, saying the regulations ensure large transit products support “an entire supply chain of American companies and their employees.”
President Trump has endorsed Buy America, most recently through an executive order, praising the policies for spurring economic growth and creating jobs. The Federal Transit Administration’s Buy America regulations, part of the 1982 Surface Transportation Assistance Act, stipulate that federal transit funds must be used toward products made in the United States, with few exceptions. Further, at least 60 percent of components for transit vehicles must be from American sources, and the requirement will soon increase to 70 percent under the Fixing America’s Surface Transportation Act.
But a recent analysis from the nonprofit group decries the same restrictions as a costly burden on U.S. infrastructure, saying the benefits of lifting such policies would likely outweigh the economic costs. For example, the study says, the average U.S. subway car costs $2.75 million, while rolling stock in foreign countries costs about $2.09 million, a difference of $700,000 or about 34 percent. In its study, AAF illustrated how rolling stock in five U.S. cities costs more, on overage, than in 14 cities overseas — though Buy America isn’t definitively pinned as the culprit.
Metro’s order of 748 7000-series rail cars would have been $441 million cheaper if the transit system paid the average foreign cost for each rail car, instead of about $2.6 million per car, according to AAF’s calculations.
To be sure, the group says, Buy America isn’t the only likely factor to blame for higher U.S. costs.
“However, the fact that the price differentials hold true across both Europe and Asia, means that policy is more likely to be an explanatory variable, and is worthy of further study and scrutiny,” the study says.
The group points to city-by-city variables in manufacturing specifications “limiting opportunities for standardization of metro cars” and the U.S. tendency to make large procurements (and the need for new, domestic manufacturing plans) as potential drivers of costs.
In a piece called “Free Trade in Trains,” ThinkProgress wrote in 2011 about why the application to transit differs from imposing such regulations on other industries: the U.S. doesn’t have the vibrant train networks that other countries do.
If we build out a more robust intercity train network and invest in expanding intracity rail transit, then building rolling stock in the United States will naturally become a more and more attractive proposition (intercontinental train shipping is hard). But it’s much easier to do that kind of robust network build-out if our train buying is a reasonable value-proposition rather than if we overpay relative to Europe and Japan.
Buy America regulations prevent U.S. transit systems from tapping into established markets for rolling stock — trains, buses, vans, and other vehicles used by transit systems, AAF argues.
The study points to CRRC MA, a subsidiary of Chinese rail car maker CRRC that manufacturers rail cars for the Boston subway system, as an example of a where the agency could have merely tapped into existing makers.
“It seems unlikely that the U.S.’ metro system requirements would render it unable to purchase rolling stock from foreign suppliers the same as other countries, and there is no reason to believe that is better suited to manufacturing metro cars than its parent company, CRRC,” the study said. “By refusing to take advantage of established global supply chains for metro cars, U.S. procurements for metro cars are merely paying a premium for the companies to open manufacturing locations within U.S. borders.”
Further, AAF says, the profits made from Buy America policies may not always flow to U.S. companies or workers — as in Boston’s case.
“Profits made from U.S. subsidiaries can flow to parent companies, meaning that the profits may not even remain in the United States,” AAF says.
Metro’s rail cars are built in Lincoln, Neb., but by Kawasaki, a Japanese manufacturer.
Proponents of Buy America don’t typically fall squarely along party lines; the policy is favored by many unions and populist political candidates appealing to American workers. In his April executive order, Trump directed the federal government to adhere to guidelines that prioritize American firms and goods in federal projects.
“We’re going to do everything in our power to make sure more products are stamped with those wonderful words ‘Made in the USA,’ ” Trump said then. “For too long we’ve watched as our factories have been closed and our jobs have been sent to faraway lands.”