Free Trade In Trains

One of the many ways in which the United States disadvantages rail vis-a-vis automobile transportation is that rail operators in the United States are typically subject to onerous “Buy America” rules that do much more to constrain the purchase of European or Japanese rolling stock than is the case for automobiles. This is ostensibly a job-creation measure, but as Alon Levy argues, it’s an extraordinarily expensive one since the main practical impact is to simply restrict the number of bidders on any given contract:

Amtrak’s Sprinter locomotives, compliant with both FRA regulations and Buy America, cost 30% more than the European locomotives they’re based on, and 50% more than competitor products built only for passenger trains rather than also for freight trains. A 30% premium works out to an extra cost of about $100 million, providing 250 jobs.

And yet it’s not the case that you earn $400,000 a year in a blue collar locomotive construction job. Something’s gone wrong here. It’s worth considering that if trains were 30 percent cheaper to buy, then for the same appropriation we could buy 30 percent more trains. In this case, that could mean 21 extra locomotives. Assuming we don’t just leave the extra locomotives on the side of the road to rot that, too, is something that would create jobs operating the trains. Ultimately, for any given amount of money that we’re prepared to spend on rolling stock, it’s hard to see why spending it wastefully would increase employment. What’s more, the main reason why the US doesn’t have much of a train manufacturing industry is that we don’t have a lot of trains. If we build out a more robust intercity train network and invest in expanding intra-city 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.