I was recently asked about the often-repeated claim that all new oil pipelines will be made with American steel, whether this really meant all new pipelines, and specifically whether it meant the Dakota Access Pipeline and the Keystone XL Pipeline.
Will these specific pipelines be made from American Steel?
As usual, this turned out to be far more complicated than I anticipated. I’d thought it was easy because there’s an Executive Memorandum calling for American-made steel in pipeline construction from January 24th. But it turns out that this memorandum actually calls for the Secretary of Commerce to come up with a plan to use American-made steel “to the extent permitted by law.” Here’s the actual text:
The Secretary of Commerce, in consultation with all relevant executive departments and agencies, shall 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 pipelines, use materials and equipment produced in the United States, to the maximum extent possible and to the extent permitted by law. The Secretary shall submit the plan to the President within 180 days of the date of this memorandum.
Meanwhile, the two Executive Memos dealing with the Keystone XL Pipeline and the Dakota Access Pipeline don’t mention American-made steel. And Deputy Press Secretary Sarah Huckabee Sanders said on March 3rd that in fact those two pipelines would not be covered under the American-made steel memo because steel was bought some time ago and is “already literally sitting there.”
Will any pipelines be made from American Steel?
Secretary of Commerce, Wilbur Ross, has to present a plan for making or repairing all new pipelines with American steel “to the extent permitted by law,” so it’s likely there will be pipelines made with American steel. However it turns out that the World Trade Organization has a say in this that complicates things.
Imported and locally-produced goods should be treated equally — at least after the foreign goods have entered the market. The same should apply to foreign and domestic services, and to foreign and local trademarks, copyrights and patents. This principle of “national treatment” (giving others the same treatment as one’s own nationals) is also found in all the three main WTO agreements (Article 3 of GATT, Article 17 of GATS and Article 3 of TRIPS), although once again the principle is handled slightly differently in each of these.
National treatment only applies once a product, service or item of intellectual property has entered the market. Therefore, charging customs duty on an import is not a violation of national treatment even if locally-produced products are not charged an equivalent tax.
This means that foreign suppliers of goods and services can and do sue if there is preference given to domestic products (assuming equal price and quality) once everything is washing around in the domestic market. Most recently Japan lodged a complaint against India in early January, saying that the “minimum import price” that India imposed on imported iron and steel violates the principle of National Treatment (Article 3.1).
Sometime on or before July 23rd, 2017, we’ll see what the Secretary of Commerce presents as a plan for building pipelines using American-made steel. I’ll update this post as events unfold.