Energy groups are pressing the Trump administration to weigh the economic harm of imposing tariffs on Chinese goods, while groups focused on transportation say China’s aggressive trade tactics must be a top concern.
“We’re trying to take a long-term view of this, versus the short-term, and it’s hard to get other industries and groups aligned with ignoring the short-term gain for the long-term protection of a U.S. industry,” said Erik Olson, vice president of the Rail Security Alliance, a relatively new trade group focused on the national security implications of federal policies on the rail-freight industry.
Olson said his group’s biggest concern is the encroachment of Chinese companies on the U.S. freight market.
One company in particular, CRRC Corporation Limited, China’s leading producer of freight cars, has been targeting the U.S. to underbid competitors with the goal of market dominance, Olson said.
“The Chinese don’t have a profit motive here, they have a market share and takeover motive,” Olson said. “That’s why we like the tariffs because they are shipping parts in,” he said.
CRRC ranked 94th in Forbes’ top 2000 global “Growth Champions” last year with a market cap of $42.6 billion and more than $33 billion in sales. By comparison, ExxonMobil’s total sales in 2017 stood at $19.7 billion.
The energy industry might like CRRC throwing its weight around because it would lower the price for tanker cars, which move everything from oil to ethanol, Olson said. But the companies should consider the price they may have to pay later.
“They are going to have the lowest price because they don’t have to make a dollar, and the energy guys might like it, because now they can buy cheaper tank cars, which makes their profit margins swell,” Olson said.
“The problem is once they take over the entire industry, they are going to raise the prices,” he said. “And so, you have one company to buy from, one company to ship through, one etc., etc.”
The oil industry, represented by the American Petroleum Institute, doesn’t like Trump’s proposed section 301 tariffs on Chinese goods because of the numerous targeted items that the industry relies on.
“Increasing the costs of these imported products with tariffs will likely hurt energy growth and negatively impact jobs and investments,” read a letter submitted last week by the group to U.S. Trade Representative Robert Lighthizer.
The oil group is weighing in similarly on Trump’s section 232 tariffs on steel and aluminum imports. In comments submitted Friday, the oil industry is urging the Commerce Department to provide waivers for steel imports for pipelines and other forms of energy infrastructure.
“U.S. natural gas and oil companies should be granted relief from the tariffs and quotas on imported steel that will harm U.S. businesses, our economy and American consumers,” said Kyle Isakower, the oil group’s vice president for policy.
“Tariffs will raise the cost of imported steel by 25 percent, while quotas will stop U.S. businesses from receiving steel for U.S. energy projects around the country — harming the president’s agenda of continuing our energy renaissance, strengthening our infrastructure and creating U.S. jobs,” he said.
The tariffs are still in the rulemaking stage and haven’t been implemented. The oil and natural gas industry would like relief spelled out for it in the administration’s final action.
Olson’s group doesn’t oppose what other groups are asking for, but says tariffs are just part of the answer in addressing a problem with China’s market dominance strategy, which the U.S. has been slow to address.
The section 301 tariffs on Chinese goods, the 201 actions on solar imports, and the section 232 tariff actions on steel and aluminum, “if they all hold, will be hugely beneficial in as far as protecting U.S. industries,” Olson said.
But what would really give the president more tools in addressing China is a new bill being worked on by Republican Majority Whip Sen. John Cornyn, R-Texas.
The Foreign Investment Risk Review Modernization Act, or FIRRMA, seeks to strengthen the Committee on Foreign Investment in the U.S., or CFIUS, which is a group within the Treasury Department that reviews the national security risks posed by acquisitions, mergers, and other foreign investments in the U.S.
Olson said his group has been successful in getting the bill to specifically guard against Chinese market dominance in the freight industry by including “infrastructure” as one CFIUS’ priorities for review.
“So, I do think there is added scrutiny, and I do think once this CFIUS bill goes through Congress, which I feel fairly confident that it’s headed in that direction, it will give more tools and bandwidth and purview for CFIUS to watch some of these deals.”
A State Department advisory panel examined Cornyn’s bill during a meeting in Washington last week, according to an agenda obtained by the Washington Examiner. Assistant Secretary of State for Economic and Business Affairs Manisha Singh co-chaired the discussion.
The State Department advisers sought to answer a specific question pertaining to how the bill would affect business based on the actions of other countries.
“Many of our allies are strengthening their investment review policies,” the agenda stated. “Do you have suggestions for priority issues we should be discussing with our allies on the topic of national security investment review?”
The State Department wanted business leaders on the panel to advise if there are “particular priorities or concerns” about the bill.
