Op-ed: Should metro worry about Chinese railcars? Just buy American

By: Mike O’Malley, President of RSI

This article appeared in The Hill on October 19, 2019.

Lawmakers in Congress want to bar transit authorities in U.S. cities from using federal tax dollars to purchase metro cars from companies owned or controlled by the Chinese government, but they have faced an intensive effort by Chinese firms in recent weeks to derail the proposed law.

As Congress moves towards the finish line with this proposed federal funding ban, opponents of the measure have stepped up their defense with a consistent retort — that there is no “American” manufacturing of passenger railcars, suggesting that Chinese state-owned enterprises such as CRRC are somehow indistinguishable from the other private companies with which it competes in the United States. American jobs and businesses are not at stake, they argue, because the companies CRRC competes with are similarly “foreign-owned” companies. 

That could not be further from the truth.

Indeed, the companies CRRC competes with can all trace their roots back to countries outside the United States, companies that include well known multinational corporations such as Siemens, Alstom, Kawasaki, Hyundai Rotem, Stadler and Bombardier. 

But there are two key distinctions that make all of these companies entirely different from CRRC. Not only are they not state-owned enterprises that answer only to a sovereign government, but they also are very much American manufacturers. Much like their relatives in the automotive sector, companies such as SiemensAlstomBombardier and Kawasaki have rich histories in the United States that stretch back decades or longer. Honda, for example, did not open its first domestic auto plant here until the early 1980s.

Today, Honda is recognized as one of America’s largest automakers, responsible for manufacturing three of the top five “most-American” cars as measured by domestic content. Meanwhile, American icons such as Ford do not even appear in the top 10 on that list, and the number one car, the Jeep Cherokee, is made by Fiat Chrysler, now globally based in The Netherlands. That is not to say that companies such as Ford or Chrysler are by any means more or less American based on those statistics alone, but it does suggest that we should change the way we look at what it means to be an “American” company.

In passenger rail, we see much of the same thing. Take Alstom, a French company with a U.S. subsidiary that employs over 2,200 people in the United States and can achieve 95 percent domestic content or higher on their railcars, leveraging a network of over 500 U.S. suppliers. Over the past nine months alone, they have hired over 250 workers to fill end-to-end manufacturing positions, from design, industrial and mechanical engineering to purchasing and supply chain, from project management to production testing. 

Many other multinational railcar builders also have key manufacturing facilities in U.S. cities across the country, from Sacramento, Calif., to Plattsburgh, N.Y., embracing the local competences, skills sets and expertise in these regions to create substantial impacts on their local economy.

Now contrast that with a Chinese state-owned enterprise such as CRRC, a company that receives hundreds of millions in subsidies from the Chinese government every year. When the company broke ground on its $95 million assembly facility in Springfield, Mass., in 2015, local politicians joined CRRC executives in praising the creation of 150 jobs for that facility.

Four years later, the facility is set to produce railcars for three separate cities and has added just 100 U.S. jobs to its workforce. Meanwhile, the shells are being imported from China, the workers are being trained overseas, and the domestic content of the railcars is limited, at best, to federally mandated minimums.

In a hearing before the House Transportation and Infrastructure Committee in May, economist Hamilton Galloway of Oxford Economics described the clear damage this will inflict on American manufacturing. For each job a state-owned Chinese company creates in the U.S., as many as five jobs are lost, his research found. These are American jobs provided by the same multinational companies that CRRC claims are no different from itself. 

The conclusion is clear: When you supplant American manufacturing with cheap, subsidized imports, American workers lose out.

Lawmakers recognize that. Both the House and the Senate have included the ban in their versions of the National Defense Authorization Act now in reconciliation committee on Capitol Hill. This most recent flurry of lobbying on behalf of CRRC shouldn’t push the ban off track. Congress should pass this legislation, and quickly.

Mike O’Malley is president of the Railway Supply Institute, a trade association representing roughly 225 passenger and freight rail builders and suppliers across North America.