The United States is a free-trading nation, regardless what President Donald Trump says on any given day. Any doubters about current U.S. trade policy should look no further than an Aug. 1 op-ed in The Wall Street Journal written by U.S. Commerce Secretary Wilbur Ross entitled “Free Trade is a Two-Way Street.”

The article and associated graph clearly show how much lower U.S. tariffs are for nearly all imported products from the European Union and China than visa-versa, with China being the bigger protectionist. The Trump administration is preparing to launch a major attack on China’s trade barriers, but the trade barrier proposals the president has made at home are deeply inconsistent with free trade in ways that undermine U.S. jobs and energy security.

In particular, the Commerce Department is expected to submit a proposal that would require domestic steel be used in all domestic pipelines, a proposal that could dramatically upend the ability of pipeline operators to source materials at a time of booming demand.

The United States has been in a pipeline boom this past decade thanks to the shale gas and tight oil booms, with roughly 20,000 miles of oil pipeline added since 2010 and more than 10,000 miles of natural gas pipeline added each year since 2008, according to the U.S. Transportation Department.

But few U.S. firms make the type of steel pipe used in large-line pipelines, and 77 percent of the steel used in line-pipe comes, one way or another, from foreign sources: particularly China, Japan, Turkey and South Korea.

According to ICF International, requiring domestic steel could add dramatically to pipeline costs, both in money and time, since disrupting the current international supply chain would cause shortages and possibly curtail future pipeline investments.

Depending only on U.S.-produced pipe “could lead to long construction delays and higher costs, potentially canceling planned pipeline project or blocking new projects,” wrote a group of oil and gas associations to the Chamber of Commerce back in April. Pipe operators cannot simply substitute other materials or products when constructing and repairing pipelines, ICF wrote.

Such restrictions on trade fly in the face of everything the U.S. energy space has learned since the marriage of hydraulic fracturing and horizontal drilling caused oil and gas development to explode forward around 2008.

Since that time, $1 trillion in capital—much of it foreign investment—has been raised and spent to boost the drilling and transportation of oil and gas from shale fields around the country. As we speak, the construction of five separate pipelines—the Atlantic Sunrise Pipeline, the Nexus Pipeline, the Dakota Access Oil Pipeline, the Rover Pipeline and the Mariner East II—are either complete or within months of completion, moving tens of millions of dollars of oil and gas to market every day using steel sourced from around the world.

Trump’s attention – some say, fixation—on the United States’ structural trade deficit and his proposals to solve it no doubt are among the reasons for his election. But it makes no sense to place trade restrictions of the energy supply chain when the product being produced, oil and gas, have much higher value and can have a dramatically greater impact on the country’s long-term health than demand for domestic steel pipe use.


Image by fuyu liu