If the United States allows some of China’s largest producers of freight rail cars into the country, they could end up eliminating up to 65,000 U.S. jobs, according to a study released Monday.
“The pace of globalization and the arrival of entrants from countries such as China into the U.S. market, are threatening domestic competitiveness. In passenger rail manufacturing, the fallout is already being felt nationwide, from Boston to Chicago and Los Angeles,” advisory firm Oxford Economics said in a report.
A U.S. railroad lobbying group, Rail Security Alliance, commissioned the report. Oxford Economics was founded in 1981 as a commercial venture with Oxford University’s business college, according to its website.
The U.S. freight rail network is a $60 billion industry covering 140,000 rail miles and supporting 221,000 jobs, according to the Federal Railroad Administration.
The worry for some is that state-owned Chinese corporations will enter the U.S. and sell Chinese-built freight rail cars far below the market price, forcing U.S. producers to close or relocate overseas. Oxford Economics estimates a minimum loss of 5,090 U.S. jobs from increased Chinese involvement in production, and a maximum loss of 64,280 U.S. jobs.
The president of the Chicago-based US-China Chamber of Commerce, whose mission is to facilitate partnerships between businesses in the two countries, said China could pose a threat to jobs in the United States.
“It seems [as] though the more investments come from China, the more jobs are going to lose,” Siva Yam told CNBC in an email.
Australia’s rail car industry almost eliminated
The study’s findings are based on Australia’s experience from the shift of its rail car production to China. Beijing-backed firms can borrow money far below the market rate and receive large subsidies, allowing them to sell products more cheaply than the going price in other countries.
A strong Australian dollar reduced the country’s manufacturing competitiveness, and increasingly free trade with China allowed the Beijing-backed companies to take a greater share of Australia’s freight railcar production, the report said.
“In under 10 years, all Australian manufacturers have largely ceased production or have gone out of business. The remaining producer, Bradken, has largely exited the Australian market,” the Oxford Economics study said.
The analysis found that most of Australia’s railcar manufacturing is now controlled by CRRC, a Chinese state enterprise and member of the US-China Chamber of Commerce.
“In the U.S. freight railcar market, the potential for disruption and loss to the U.S. economy may be even more acute than in Australia, especially given the larger size of U.S. freight railcar demand,” the report said. The analysis projects a loss of up to $6.5 billion in U.S. gross domestic product.
Some members of Congress are already concerned about the Chinese threat to U.S. freight manufacturing and jobs.
Chinese rail projects in the U.S. so far have typically focused on U.S. government-backed passenger rail. Under “Buy America” legislation, foreign companies that win contracts for federally funded projects must use some U.S. materials and build U.S. production plants.
“Buy America does not apply to all U.S. rail projects, and the U.S. freight manufacturing industry is particularly vulnerable, as it does not enjoy Buy America’s protections,” analyst Michelle Ker wrote in a February report from the U.S.-China Economic and Security Review Commission.
That said, not all Chinese investment hurts U.S. workers. Chinese-owned companies added about 50,000 U.S. employees last year, for a total of more than 140,000 American workers, according to consulting firm the Rhodium Group.