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President Trump’s desire that pipelines in the U.S. buy American iron and steel products may run into international trade law violations, and have a yet-unpredictable impact on costs and prices for manufacturers and pipeline companies, experts and economists reckon.
Last month, President Trump issued a memorandum on the construction of American pipelines, asking the Secretary of Commerce to prepare within 180 days a plan “under which all new pipelines, as well as retrofitted, repaired, or expanded pipelines, inside the borders of the United States, including portions of pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law”.
The American Iron and Steel Institute (AISI) praised President Trump’s executive actions to expedite Keystone XL and Dakota Access pipelines as “ensuring key markets for domestic steel and pipe products”.
However, one concern over the ‘buy American’ provisions is that they may violate World Trade Organization (WTO) regulations that call for non-discrimination of suppliers.
According to S&P Global, “the U.S.-made provision, if ultimately enacted, is expected to trigger a trade war under the U.S.’ World Trade Organization commitments”.
In addition, the government telling private companies how to do their business is also a concern, especially in light of traditional Republican values that favor little government interference in business.
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“If it becomes a bargaining chip to the pipelines getting the environmental review and the permits necessary to complete the projects, that’s very problematic. It’s a form of extortion,” Nick Loris, an economist at the conservative Heritage Foundation, told Dallas News last week.
Others are worried that costs could increase if companies are forced to buy American-only products.
According to John Stoody, spokesman for the Association of Oil Pipe Lines, who spoke to Dallas News:
“Pipeline companies currently have an America-first general policy. But it’s a competitive market, and operators build the projects at the lowest cost possible — they are obligated to.”
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.