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Obama administration sells transit out to protectionists (again)

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I’m not sure how I missed this (actually, I have an idea – more on that in a minute), but back in February the Federal Transit Administration issued the following warning about strengthened “Buy America” transit procurement protectionism:

Congress and the Obama Administration asked Americans to provide $787 billion to help avoid an economic catastrophe and restore and modernize America’s infrastructure.  In return, the Federal Government asks recipients of Recovery Act funds to be held accountable to the American public by using these resources to maximize opportunities to put Americans back to work and to support our domestic manufacturing industry.

In order to support this goal, the Federal Transit Administration (FTA) will not consider any requests for a public interest waiver of FTA’s Buy America regulation for Recovery Act projects.  If issued, such waivers would allow recipients of Recovery Act funds to procure steel, iron, or manufactured products, including rolling stock, that are not produced or manufactured in the United States.  I will not waive Buy America for Recovery Act projects because such action would undermine the very purpose and intent of the Recovery Act—to preserve and create jobs in America.  In addition, FTA will continue to carefully scrutinize requests for waivers based on non-availability to determine whether suitable American-made alternatives exist, and if none do, whether the funds can be used in an alternative manner that fulfills the goals of the Recovery Act.  Similarly, FTA will examine requests for cost-differential waivers to determine whether the cost savings justifies the loss of American jobs, especially in critical manufacturing sectors.  By necessity, FTA will extend existing, standing waivers—for products exempted by the Federal Acquisition Regulation, microprocessors and microcomputers, and small purchases—to Recovery Act-funded procurements, although I encourage recipients to use their best efforts to carry out the intent of Congress and the Obama Administration by carefully stewarding their Recovery Act funds in a manner that supports a healthy and robust domestic manufacturing base.

Buy America is a policy dating back to the Great Depression which requires the government to buy goods made in America when at all possible. For transit, it means that 60% of all materials, from steel to streetcars, must be sourced domestically, and final assembly must take place in the US as well. This final assembly requirement sometimes (often?) means that transit vehicles manufactured abroad are disassembled, shipped to the US, and then reassembled by American workers – the modern-day equivalent of paying people to dig holes and then fill them back up. Normally there are waivers if parts and materials would raise the cost by more than 25% and in the nebulous case that applying Buy American “would be inconsistent with the public interest” (seems to me like it’s always inconsistent with the public interest), but it doesn’t look like the current administration will be granting them any longer.

And while I think it’s a dumb policy in all circumstances, I suppose that the stimulus (“Recovery Act”) was intended as a Keynesian jobs program, so I’m not surprised to see Buy America applied very strictly to those funds. This part, though, was not something that I was expecting:

In addition to the above guidance, please note that this heightened standard is not exclusive to the Recovery Act. FTA has raised the bar for all Buy America waiver requests.  All requests will be scrutinized.  Most requests will result in FTA offering technical assistance to develop a solution that will not necessitate a waiver.  Please be cautious about leading your projects down a path where a Buy America waiver will be needed, as it is unlikely to be granted.

When I last wrote about Buy America provisions hampering transit procurement, I caught some flak from some commenters for calling it Obama’s policy, since it’s been in force for decades – but he owns this one.

Transit advocates are always asking for more subsidies, but they seem remarkably unconcerned about the byzantine tangle of FTA, FRA, and union rules that cause America to have some of the most expensive and inefficient transit in the developed world. Last week I suggested that planners’ reluctance to speak out against cost-increasing union work rules is caused by the ideological affinity between liberal urban planners and organized labor, and I think there’s something similar at play with this recent increase in protectionism. Mass transit boosters waste no opportunity to brag about all the domestic jobs it creates, but all this talk about “green jobs” has its costs.

Comments

  1. I guess I’m missing the connection to organized labor here.  There are no rules that demand the final assembly, for example, be done with union labor.

    I’m also curious about your assertion that transit advocates are ‘remarkably unconcerned’ about stupid regulations and work rules.  Can you find me a quote from one transit advocate saying “I don’t care about the FRA rules, it’s no big deal?”  Because I can find lots who argue against those rules.  What do you base this conclusion on?

    The reason transit advocates ask for more subsidies is because more money is still needed – even in an ideal regulatory environment, there is still such a massive capital need.  It’s also a matter of political feasibility.  Politics, after all, is the art of the possible, and it shouldn’t be a surprise that a recession strengthened protectionist policies (no matter how shortsighted they are).  If you can point out a real roadmap to build a new political base around transit investment and deregulation, I’m all ears – but there’s a reason these coalitions have formed together and stuck together over time.

  2. I guess I’m missing the connection to organized labor here.  There are no rules that demand the final assembly, for example, be done with union labor.

    I’m also curious about your assertion that transit advocates are ‘remarkably unconcerned’ about stupid regulations and work rules.  Can you find me a quote from one transit advocate saying “I don’t care about the FRA rules, it’s no big deal?”  Because I can find lots who argue against those rules.  What do you base this conclusion on?

    The reason transit advocates ask for more subsidies is because more money is still needed – even in an ideal regulatory environment, there is still such a massive capital need.  It’s also a matter of political feasibility.  Politics, after all, is the art of the possible, and it shouldn’t be a surprise that a recession strengthened protectionist policies (no matter how shortsighted they are).  If you can point out a real roadmap to build a new political base around transit investment and deregulation, I’m all ears – but there’s a reason these coalitions have formed together and stuck together over time.

  3. 1. I guess you’re right that the American manufacturing facilities aren’t unionized. I guess I should have said “domestic manufacturing interests.”

    2. As for being “remarkably unconcerned,” when’s the last time you saw Streetsblog, Greater Greater Washington, or Transportation for America arguing against the rules? (In fact, Streetsblog recently actually suggested that we should have more federal safety regulations!)

    3. As for “political feasibility,” very little that’s not the status quo is politically feasible – almost by definition. If I limited this blog to what was politically feasible right now, it would be a pretty boring blog.

  4.  I see those kinds of discussions of regulations in the GGW comments all the time – also in discussion threads over at The Transport Politic and others.  And if you set the bar at the elimination of regulations, you’re going to be very disappointed, but I think there is a strong desire to make sure the regulations make sense and actually accomplish the overall goals of the policies they are supposed to support.

    In regards to political feasibility, of course it hews close to the status quo – but that’s how actual change happens.  By all means, please continue to point out the shortcomings of regulations and whatnot, but aside from the interest in your blog, realize that rants against reasonable changes will do little to advance any actual change. There’s a reason why T4A doesn’t rail on these subjects, and that’s because such commentary would be counterproductive to what they want to do.

  5. There’s a huge amount of distance between the US status quo and complete elimination of all regulations (I assume that’s what you mean by “elimination of regulations”?). Japan and Europe manage to run competent public transit authorities and have healthy cities without being anarcho-capitalist utopias.

    As for these discussions happening in comment threads – that’s a start, but it would be a lot more helpful if they were happening in the posts themselves.

  7. Yeah, when I was doing research for this post I actually came upon that page – it stuck with me because I remember thinking that it was odd that a bike group was talking about it.

  8. The more accurate headline for this post would have been “Obama administration sells transit out to outmoded mercantilism.” Organized labor’s clout in heavy transportation equipment is minuscule.

    Three of the four best-selling bus makes in the U.S. aren’t even American companies. Two are Canadian and one is Hungarian. As for rail construction, foreign companies also dominate but so much of the work is American because the contracts essentially involve customized production and one-off work. That also drives up costs.

    For bus and rail equipment, though, we aren’t talking about major employment to begin with. The two Canadian bus builders, New Flyer and Orion, have American plants just to comply with the Buy American laws. Both are also union-represented by virtue of the CAW contract extending to UAW for the American finishing work. We’re talking about a few hundred UAW employees at the Minnesota and New York plants. The UAW, meanwhile, represents tens of thousands of employees for each of the Big 3 carmakers. Those jobs are the UAW’s priorities.

    As for the Hungarian company, ironically named North American Bus Industries, it’s American finishing plant is in Anniston, Alabama — a right-to-work state. NABI shells and frames are made by union workers in Hungary and exported here for assembly.

  9. With that being said, I would say that Buy America policies need to be scrapped. Transit procurement illustrates why.

    Buy America laws create and protect jobs that exist primarily because of the existence of the laws themselves. If the laws were to be repealed, the factories would not serve any market purpose. Without Buy America, New Flyer and Orion might close their Minnesota and New York assembly plants but the U.S. could get identical buses from Winnipeg and Mississauga. NABI might even shift all of its American bus-building operations to Alabama and give the market a 100% U.S.-made bus.

    The policies create unnecessary high costs because the manufacturers must embed the cost of a policy factory into every unit they build. The 60-40 policy means the U.S. has to pay more for the 60% “policy factory” and compensate the manufacturer for the loss incurred by the slack capacity in doing 40% of the work abroad. New Flyer and Orion are capable of producing 100% of their buses in Canada. They do for their domestic market — and the buses across Canada and the U.S. are exactly the same.

    Buy America laws have also stifled the very markets they were intended to support. The U.S. lost its market edge in public transportation manufacturing because we let a cycle of decline and disinvestment set in. U.S. manufacturers failed or exited the business. The big problem is the U.S. market has become a monopsony. The FTA is the buyer, not the transit agencies that receive delivery. It sets the standards on how its money can be spent, and the procurement process favors low bids and established track records. This limits the market to well-established players. And American manufacturers still lose! GM left the bus business in the mid-1980s. Flxible went bust. American Neoplan USA went bust (its German namesake is fine). Millennium, which inherited the venerable RTS legacy, could barely get a single RTS out under its leadership.

  10. Perhaps the title of the post ought to change then?  Wad has a fine suggestion below for an alternate title.  Nothing you’re complaining about has anything to do with unions.

    And yes, transit advocates, including those of us on the left, complain about these things all the time.  Complaining about operators’ unions is a popular sport among pro-transit bloggers, and I can’t think of any transit advocates who think the current crop of FRA regulations are a good thing.  The railroads mostly like them (and scream bloody murder about positive train control), but that’s because they already have tons of rolling stock and miles of tracks which comply with the current regime–and the operational practices of many of the freight operators (long, infrequent trains) aren’t adversely impacted by the buff strength requirements imposed on locomotives.  If you’re a railroad trying to minimize labor costs by hauling extra-long consists, having locomotives built like tanks is an advantage, not a weakness, as the maximum pulling force a locomotive can exert is proportional to its weight.  (Otherwise, friction between wheels and rails breaks down, and the wheels spin in place).   Current FRA regs also help out by making passenger service inconvenient and expensive–many common modes of operation found in Europe, such as S-Bahns and tram-trains (both of which often run on freight rails outside of city centers), are pretty much impossible under current US law.

  11. Perhaps the title of the post ought to change then?  Wad has a fine suggestion below for an alternate title.  Nothing you’re complaining about has anything to do with unions.

    And yes, transit advocates, including those of us on the left, complain about these things all the time.  Complaining about operators’ unions is a popular sport among pro-transit bloggers, and I can’t think of any transit advocates who think the current crop of FRA regulations are a good thing.  The railroads mostly like them (and scream bloody murder about positive train control), but that’s because they already have tons of rolling stock and miles of tracks which comply with the current regime–and the operational practices of many of the freight operators (long, infrequent trains) aren’t adversely impacted by the buff strength requirements imposed on locomotives.  If you’re a railroad trying to minimize labor costs by hauling extra-long consists, having locomotives built like tanks is an advantage, not a weakness, as the maximum pulling force a locomotive can exert is proportional to its weight.  (Otherwise, friction between wheels and rails breaks down, and the wheels spin in place).   Current FRA regs also help out by making passenger service inconvenient and expensive–many common modes of operation found in Europe, such as S-Bahns and tram-trains (both of which often run on freight rails outside of city centers), are pretty much impossible under current US law.

  12.  Well, Streetsblog linked to THIS article.  (And its unclear whether you’re talking about the city-specific Streetblog sites, or the blog aggregator).

  13.  Well, Streetsblog linked to THIS article.  (And its unclear whether you’re talking about the city-specific Streetblog sites, or the blog aggregator).

  15. For what it’s worth, the ‘Buy America’ mindset stretches back to well before the Depression. During the run-up to the 1858 midterms, Republicans exploited news that Scottish pipe had been used to construct the Washington Aqueduct in Pennsylvania. The economy had not recovered from the Panic of 1857 and Pennsylvania was a hotbed of protectionism with its iron and coal industries. Democrats (the party of free trade back then) usually scaled back free trade policy to accomodate Pennsylvania, but held fast in 1858. Ultimately, Democrats were slaughtered in Pennsylvania that year and Republicans were well positioned to elect Lincoln in 1860 and to becoming the party of protectionism. Before 1857, the party was primarily an antislavery party, but with the panic they would push for higher tariffs until World War II.

    Makes one cynical about overcoming such opposition.

    Source: James L. Huston, The Panic of 1857 and the Coming of the Civil War

  16. Off topic … when you move to New York, take the ferry to Staten Island. I did this morning and I was surprised by what I found at the other end. The ferry terminal on Staten Island is a major transit station that connects directly to Manhattan’s financial district via a short boat ride. It’s surrounded by a big road, a large surface parking lot, a minor league baseball stadium, and the Borough Hall. Waterfront property in New York City with fast, easy (and free!) access to Wall Street, and it’s used for a bunch of crap. What a waste!

  17. Hey,nice post.The American manufacturing facilities aren’t unionized.Well written article.Thanks for sharing this article with us.Keep sharing with us.

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