"Buy America" pipeline directive not well received on either side of the border
Various trade associations representing the US energy sector and pipeline operators are asking President Trump to reconsider his Administration's recent executive order requiring the use of US steel for pipeline construction.
The coalition, which includes the American Petroleum Institute, Interstate Natural Gas Association of America and Association of Oil Pipelines, warns that such a regulation will increase costs and limit new pipeline construction, which may have the unintended consequence of delaying or deferring new projects.
Trump has ordered his Commerce Department to develop a plan to maximize the use of American steel for pipeline construction. The President said at the time "I am ... very insistent that if we're going to build pipelines in the United States, the pipes should be made in the United States," vowing to "put a lot of steel workers back to work."
Lobbyists argue their industry requires a wide variety of steel grade, meeting tight specifications and that the current domestic capacity is limited at best. The association wants exemptions for cost, quality and schedule.
Trump has attempted to connect pipeline approvals to his "Buy America" agenda, although it remains unclear how the Administration would make such a regulation legally binding. The US Chamber of Commerce has already noted that the federal government can mandate sourcing requirements for publicly-funded projects but "imposing similar mandates upon privately funded commercial projects would be unprecedented."
Not surprisingly, the new directive was well received by the US steel industry, who have already seen domestic steel prices rise since Trump's election. Steel producers in both the US and Canada (and even the EU) have been hit hard in recent years by cheap Chinese imports, often sold below cost due to significant over-capacity in China.
However, not all steel producers are thrilled with Trump's plan. UK-based Evraz, which operates steel mills on both sides of the border says its business "depends on the free flow of goods between the US and Canada to serve customers in both markets and preserve the viability of well-paying middle-class jobs in both countries."
Evraz has committed to manufacturing 25% of the piping required for the Keystone XL pipeline in its Regina steel mill.
The Canadian federal government says it "has serious concerns regarding the plan that the Department has been asked to develop given the negative impact the envisioned restrictions would have on our shared supply chains and the Canada-U.S. trade relationship." The government warns the restriction would create a "negative precedent, increase the regulatory burden and be contrary to fundamental World Trade Organization and North American Free Trade Agreement obligations."
Mexico, Australia, the European Union and South Korea have also raised objections against the directive, which by all accounts appears to be in violation of WTO regulations.