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Insourcing Infrastructure: A Local Transit Director's Plan to Bring Back Jobs

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The Bay Area Rapid Transit District's (BART) decision to contract with an overseas firm to construct 775 new BART cars, a $4.2 billion public investment, sparked a public outcry. Because the cars will be built overseas, the overhead for the project, which includes the cost of international travel and housing for safety inspectors, will be enormous. BART officials claim that they had no choice because they didn't receive any bids for the work from U.S. firms, noting that there are no longer any domestic manufacturers that make light rail cars. They further claim that the high overhead, estimated at more than 50 percent of the total cost, is "well within the norm for transit agencies purchasing new vehicles."

This story underscores the failure of state and federal policymakers to form a strategy to source public investments in the U.S. and to support manufacturing in general. In the middle of the greatest economic crisis in generations, our government is sending billions of dollars overseas instead of supporting job growth at home, all while entering into international trade agreements, such as the KORUS FTA and the under-negotiation Trans-Pacific Partnership (TPP), that will severely restrict the ability of future policymakers to source public investments locally. Americans overwhelmingly support Buy American policies and want government to support manufacturing, which they view as essential to our economic future.

In response to the BART contract decision, I sat down with Joel Young, the Director-at-Large for the Alameda-Contra Costa Transit District (AC Transit) -- who recently supported policies to move AC Transit's bus contract from a Belgian manufacturer to a Bay Area firm -- to discuss what policymakers could be doing to source contracts locally. An edited version of our discussion follows:

ROBERTSON: Why should transit agencies source infrastructure projects locally?

YOUNG: Three reasons. First, that's what our constituents are asking us to do. Taxpayers want their money to be spent on local workers and as elected officials, we have a responsibility to make sure that public dollars are spent according to public values. Second, sourcing overseas wastes taxpayer money. When I first joined the AC Transit Board, one of the first items that caught my attention was the incredible cost of sending employees back-and-forth to Belgium to manage our bus contract there, not to mention the generous living expenses provided while they are overseas. Third, we have to recognize the positive benefits for our agency of contracting locally. Local workers support our economy in all sorts of ways. They buy houses in the East Bay, they pay property taxes, and they spend money at local businesses, creating more jobs for our economy and more revenue for the agency; that multiplier effect needs to be factored into each bid when we assess it, and that's not happening right now.

ROBERTSON: U.S. Trade Representative Ron Kirk recently told me that American workers don't want these kind of jobs. Do you think that's true?

YOUNG: I think that's crazy. Unemployment in Alameda County is extremely high and the one thing everyone asks their elected officials is what are you doing to create jobs? Manufacturing jobs offer good pay and benefits. They're highly desirable.

ROBERTSON: What about the argument that American workers lack the necessary skills?

YOUNG: The skill deficit is a real issue. As these jobs went overseas, our skilled workforce declined. Now that we want to compete in infrastructure and green tech, we're finding that our education system is not set up to prepare young people for those kinds of jobs. State Senator Loni Hancock and others have created partnerships with trade unions to provide job-specific training, but there is still a lot of work to be done.

In the East Bay right now, young men of color are dropping out at an incredible rate. They're more likely to end up in prison than to gain a four-year degree. It's easy to blame the kids, but we're not giving them a fair deal. Many jobs these days require a B.A., a series of unpaid internships, and a graduate degree. Most young people cannot afford to put in that much time and take on that much debt. If we create another path with a shorter timeline, young people will be more likely to stay in school. Working in modern manufacturing requires real skills, math skills, but the training period is much shorter. We should give young people that choice.

ROBERTSON: Some say that manufacturing jobs are never coming back, and that we should focus on research and design jobs. Do you think that pursuing manufacturing work would be a step backwards for our economy?

YOUNG: There's a perception out there that Americans will keep getting all of the research and design jobs and that we can send all of the manufacturing work overseas. With modern manufacturing, that's a fantasy. Companies need their engineers to be close to the manufacturing site because perfecting the process is just as important as perfecting the design. If we want the value-add work, we need to have a manufacturing base.

China recognized this decades ago. You can't have one without the other. That's why they invested in their infrastructure and supported their manufacturers. Now they're matching us in research-and-development expenditures and awarding far more engineering doctorates than we are.

ROBERTSON: So what can we do differently to rebuild our manufacturing base?

YOUNG: This isn't a simple problem and there's no simple answer. First of all, government agencies need to get together and make a clear statement to taxpayers and the private sector that we are dedicated to spending tax dollars in our local community. If we issue a joint statement to that effect and we work together on developing our procurement rules, that would be a start.

The next step would be to develop a long-term strategic plan to support our manufacturing industry. High-tech manufacturing requires a complex support network. You need sources of innovation. That requires universities and venture capital networks. You need capital. You need facilities and transportation infrastructure. And you need a workforce with a specialized skill set to execute the work. To suggest that all of that can occur on its own without some amount of intervention is absurd. It requires regular communication and planning, cooperation between labor, business, and government. A country like Germany is a great example. Germany has high labor costs and a high per capita income. Yet Germany continues to be very competitive in manufacturing and exporting goods because they have strong cooperation between business, unions, and government.

I know this sounds difficult to execute and that's why it makes sense to start with infrastructure. We knew that we would have to replace the BART cars for decades. Those cars are highly specialized because they run on a different track width than standard rail cars. Any company bidding on that work will have to create new machines and new materials to be able to manufacture the cars. With more planning, all of that work could have happened here, at a substantially lower cost to taxpayers.

The Bay Bridge span's another great example. We knew that we were going to have to replace the span years ago but we failed to make a plan to build it here. China had a plan to build projects like the Bay Bridge span. The Chinese government realizes that, with the world industrializing at a pace never seen before in history, infrastructure will be a huge part of the future global economy. So they had a strategy that included training for workers and investing in their infrastructure. Because they planned ahead and we didn't, we sent $7.2 billion of our tax dollars to them in the middle of a massive recession.

ROBERTSON: Trade deals like NAFTA and the under-negotiation Trans-Pacific Partnership (TPP), sometimes called the Trans-Pacific FTA, undermine state and local purchasing policies. Efforts to create jobs, like "Buy America" or local sourcing initiatives, can be challenged by multinational corporations as an "unfair barrier to trade." What can we do to ensure FTAs don't stand in the way of the public interest?

YOUNG: We can't let trade agreements stand in the way of job creation, and that's why I support fair trade. I don't think there's any debate that these agreements have cost jobs. I don't know much about the Trans-Pacific Partnership, but I assume that it's going to continue the trend of taking power away from state and local governments. The priority of every elected official should be to create jobs here in our community. That's what I did at AC Transit by supporting our "Buy America" policy and that's what I hope to do at the state level. If trade rules stand in the way of creating and keeping jobs here, then we have to push our Congressional delegation to vote against them.

ROBERTSON: The TPP is expected to be the largest FTA in U.S. history, yet civil society, and even Congress, have been effectively shut out of the negotiations. Leaked documents show trade negotiators are even rolling back reforms. What's your position on the TPP negotiations?

YOUNG: I think the public needs to be included. We learned from NAFTA and other deals that these agreements contain many provisions that have nothing to do with trade, and they can prevent commonsense efforts to create jobs. If these negotiations can't stand up to the light of day, we shouldn't be having them. One of my goals at AC Transit was to increase transparency and accountability. We need to be doing that at all levels of government if we're going to restore the public's faith in what we do.

Author's note: Joel Young is a candidate for California State Assembly District 18. The California Fair Trade Coalition does not endorse candidates for office.

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