The plot of the story of the new made-in-China Oakland Bay Bridge has begun to thicken. Further digging has uncovered additional flaws in the rationale for having a major part of one of the United States' biggest infrastructure projects outsourced to China.
In the June 26 New York Times article that first broke the story, the claim was made that a major reason for having the fabrication of the bridge's major sections done in China was that American fabricators didn't have the capacity or capability to perform the work on such giant structures. Because of their supposed superior capabilities and lower labor costs, the Chinese were said to be providing the $7.2 billion bridge for $400 million less than U.S. fabricators who probably couldn't have done the work in any case.
But it turns out that the issue wasn't one of capability but of scheduling. U.S. fabricators had the capacity and the capability to do the work but argued that the project would take more time than the Chinese were proposing in their bid. Well, in the event, the Chinese have not been able to meet their own timetable, and the bridge is actually being built on the schedule originally proposed by the American fabricators. The first delivery of Chinese steel was more than a year late and the whole project is three years behind schedule and $5.2 billion over budget according to information provided by the National Steel Bridge Alliance.
So it looks like the Chinese low-balled their proposal in order to get the bid and then more than ate up the presumed savings by failing to meet their own timetable.
By proceeding with the project as it did, California exported more than 2,500 manufacturing jobs to China and then added insult to injury by spending taxpayer dollars to send 250 public and private workers to China to provide training. In effect, at a time of economic hardship and rising unemployment in the United States, the state of California provided funding and training to create jobs and make workers more competitive in China.
It is also important to note that the steel producers and fabricators in China don't even come close to meeting California's own green environmental standards. It has been estimated that as much as a quarter of the particulate matter in California air now originates in China. So the bridge deal is shifting production from relatively green U.S. producers operating under California's tough environmental standards to brown Chinese producers whose work on the bridge is adding to the pollution of California air. In effect, the state is conniving to violate its own environmental standards in order to achieve savings that were never realistic and that have not only evaporated but become cost overruns.
Nor were the savings ever going to be real net savings for the state or for the United States. Some critics have argued that, in principle at least, the original estimated savings would have provided $400 million that the state could have used to keep more teachers, policemen, and firemen on the job. But that was never the case. The money for the bridge does not come from the state's general revenue. Rather the bridge is funded by a special bond issue that will be repaid from toll collections. Even if there had been some saving for the state's general revenue, the negative impact on California and on U.S. jobs, unemployment compensation, tax revenues, and provision of public services of the total amount of the spending in China would have far outweighed the putative savings. Under the actual circumstances, the negative impact is even greater.
Until the states of the United States and the federal government have a serious, comprehensive strategy for taking a holistic approach to revitalizing the competitiveness of the U.S. economy, projects like the Bay Bridge that should generate domestic jobs and production will be a drag on rather than booster of a U.S. economic recovery.
Clyde Prestowitz is the president of the Economic Strategy Institute and writes on the global economy for FP.