In the world of high-speed rail, imitation can be an appealing form of flattery. While the Obama administration is literally tying the railway supply industry in knots by insisting on trainsets built solely of U.S. content, China opened its arms to foreign train manufacturers during the early stages of its high-speed rail program.
Now within the space of six years, China has become the fastest-growing exporter of rail equipment in the world. On Wednesday, Argentina signed a $12 billion deal to purchase locomotives, cars and infrastructure from state-owned Chinese railways. This triumph follows the country’s success in exporting its technology to Saudi Arabia, Turkey and Venezuela.
China’s ability to create a booming rail sector is a case study of how to leapfrog over established builders and stimulate domestic employment at the same time.
In 2004, China sealed a contract with a consortium led by Kawasaki Heavy Industries to build “bullet trains.” Local equipment makers soon mastered the know-how for their manufacture and licensed other design features from companies in Canada, France, Germany and Sweden.
Today, China operates the world’s fastest trains, with about 15 percent of the parts coming from overseas.
Cutting a Deal in California
On the global stage, China was a non-factor in high-speed-rail (HSR) manufacturing until about 20 months ago when it started bidding on projects overseas. With its cheap cost basis, China quickly made inroads against Siemens of Germany and Alstom of France – together with its former partner, Kawasaki, which reportedly could not imagine that the catch-up would be so fast.
The Chinese government recently signed a preliminary agreement to cooperate with California to help finance and build a HSR line between San Diego and Sacramento. China’s rail ministry has a framework agreement to license its technology to General Electric.
GE describes the agreement as requiring at least 80 percent of the components to come from American suppliers and final assembly in the U.S. GE itself would supply 200-mph electric locomotives using technology licensed from China.
Gov. Arnold Schwarzenegger is scheduled to lead a trade mission to Beijing in September to discuss China’s offer.
Insisting on All-American Content
The example of China provides an alternative model to the “do-it-yourself” approach of the Obama administration. Propelled by a desire to create jobs quickly, the administration says it will only fund rail projects where all manufactured parts – plus the underlining iron and steel – are produced in the U.S.
The 100-percent American rule was contained in Congressional legislation that authorized the spending of $8 billion in stimulus funds for HSR. The administration has told suppliers that it does not plan to use the law’s waiver to exempt some components, even though subway and light-rail trainsets funded with federal money may use up to 30 percent non-U.S. content.
America’s supremacy in railway carbuilding has long past. The last builder, Pullman-Standard Co., went out of business 25 years ago. A century before, George Pullman built the largest passenger railcar business in the world through his innovative Pullman sleeping car.
Without any current base to produce such equipment domestically, attempts to build a homegrown business are fraught with problems, according to many experts.
Last month, the Government Accountability Office (GAO) noted that it could take as many as nine years to build high-speed trainsets domestically. This included up to 21 months for testing the equipment and 42 months for production.
Easing Safety Rules
Complicating the situation are rules established by the Federal Railroad Administration that bar foreign trainsets on American rails because they do not meet the agency’s safety standards.
FRA requires massive amounts of steel in passenger cars so they can withstand a crash with a freight train on shared track. Foreign standards focus more on crash avoidance rather than crash survival, the GAO pointed out, making for lighter trains that nevertheless have stellar safety records.
The agency has shown some relaxation of its heavy-metal mindset by allowing California to operate European-style trains on a dedicated passenger line being planned between San Francisco and San Jose.
Opening the door to foreign suppliers of cars and locomotives, at least until American companies can digest the technology required for their manufacture, could speed up rail service and potentially re-position the U.S. in markets once ruled by George Pullman.
Photo credit: jiadoldol
