Politics

The Problem With President Trump's Promise to Use U.S. Steel for Pipelines

President Donald Trump's promise to revive the steel industry by prioritizing American-made steel for two controversial projects might be easier said than done, according to a recent report published in The Boston Globe.

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Though Trump pledged to create jobs in the steel industry by encouraging companies — like those associated with the Dakota Access and Keystone XL pipelines — to use American-made steel material, the Globe pointed out two potential issues with that strategy. 

For one, most of the pipeline for the Dakota Access pipeline — a 1,172-mile strip that will run across four states — has already been laid and the material being used for the Keystone XL pipeline "is stacked in a field and waiting for construction to begin," according to the Globe. Both have mostly been paid for and both contain steel materials from foreign companies

Some executives in the steel industry are hopeful that Trump will make good on his promise by simply getting rid of the foreign-made steel and purchasing the material for the Keystone XL pipeline from domestic companies.

Keystone XL Protest

But beyond being expensive, that plan could also run up against legal challenges: the World Trade Organization’s Government Procurement Agreement prohibits members from mandating material sourcing from domestic companies for privately funded projects — which happens to be the case for the Keystone XL pipeline.

Another obstacle: the type of steel required for these pipelines is rare among U.S. steel companies, Charles Bradford, the president of Bradford Research, told the Globe.

"Somebody at the White House doesn’t have a clue," he said. "This is not a common type of steel. It’s a very high strength steel which very few people make."

Trans-Alaska Pipeline

As far as future projects are concerned, there may be reason for enthusiasm in the steel industry.

On Jan. 24, Trump signed an executive memorandum asking the commerce secretary to develop 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 the pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law."

Trump's memorandum is largely symbolic, though, The Washington Post reported. It would be difficult to draft a legally binding policy that requires companies to purchase steel material from domestic sources if the price is still lower in foreign countries.

DAPL in Iowa

What's more, the American Iron and Steel Institute noted that 71 percent of the steel used in America is bought from domestic sources in a 2016 report.

Efforts to encourage an "America first" economic model for the manufacturing industry over the past 40 years haven't proven effective, according to a 2015 report from the Congressional Research Service. Though it's difficult to fully assess the impact of these policies, the researchers concluded that the "available data suggest that the steel produced for the Buy America market represents a small portion of total domestic demand for steel." 

[H/T The Boston Globe]