Manufacture This

The blog of the Alliance for American Manufacturing

States turn to state-owned enterprises for new infrastructure.

Let’s be clear: When Congress kicked the can down the road on transportation funding last week, it merely extended MAP-21 funding, which basically applied a two-year Band-Aid to a U.S. surface transportation infrastructure in dire need of triage

Again, Washington tossed the hot potato back to the states. So while trying to stretch their remaining federal dollars, awarding contracts to the lowest bidder, states have needed to get creative to fund their infrastructure. I fear this short-term thinking is selling our long-term interests short.

Last year the Massachusetts Bay Transportation Authority (MBTA) awarded a contract to build 284 Red Line and Orange Line subway cars to CNR MA, a U.S. subsidiary of a Chinese state-owned entity. Through a wide array of illegal subsidies, these state-owned manufacturers are able to undercut the market prices that U.S. private businesses are able to offer.

It is cheating, plain and simple.

While the company agreed to the conditions set by the state of Massachusetts (including adhering to Buy America requirements and building a factory in Massachusetts), it also plans to do so at a price between a quarter and a half a billion less than the other bidders. And recently, CNR MA’s parent company merged with another of China’s other state-owned rail manufacturers, and this new company -- CRRC -- is looking to edge out other global competitors. That could get political since many of these global competitors have factories here in the U.S. and employ thousands of Americans. 

In a climate where states have huge infrastructure issues and minimal capital to spend, here's a good question: Has Washington’s lack of investment put at risk existing domestic private-sector manufacturers and the domestic supply chains that employ thousands of workers throughout the United States? Time will tell.