TriMet has been awarded $2.4 million from the Federal Transit Administration to research a U.S.-produced streetcar propulsion system.
The work will be led by Clackamas-based Oregon Iron Works Inc., whose subsidiary, United Streetcar LLC, is the only U.S.-based manufacturer of streetcars.
In a news release Friday, the Federal Transit Administration said the funds represent its 80 percent share of a $3 million project in which $600,000 will come from a local match.
The goal of the project is to fill a major hole in the U.S. streetcar supply chain. Propulsion systems account for about 20 percent of a streetcar’s cost, but the only manufacturers are based outside the U.S.
United Streetcar, which last year unveiled the first U.S.-built streetcar in 58 years, uses a propulsion system made by Czechoslovakia-based Skoda Electric S.A.
Chandra Brown, United Streetcar’s president, said the federal funds will be used to test a propulsion system developed by Milwaukee, Wisc.-based Rockwell Automation.
Once installed, 90 percent of the streetcar’s components will be made domestically, up from 70 percent today, Brown said.
So I am going to sound like a typical economist here - but guess what I am a fairly typical economist (atypical in my wit, wisdom and good looks but that is another matter). Why do we care so much about having our streetcars totally made in the US? What if we are not terribly good at it? Perhaps the Czechs are real experts and can produce a more reliable propulsion system for less money. Wouldn't it be better to focus on what we are good at - like designing iPhones, making good beer (Pilsner - pah!), making Hollywood blockbusters - and then trading them to the Czechs for streetcar propulsion systems?
Almost 200 years of economic theory suggests that we should and that if we do we will be better off.
Is there a counter-argument? Actually yes, and it is essentially what Paul Krugman won the Nobel Prize for. If the source of the Czechs comparative advantage in streetcar engines is from economies of scale, or if the source of their comparative advantage is from having gotten really good at it through experience (i.e. that there is a strong learning curve effect) than this type of government intervention can actually help, over time, the US become better comparatively than the Czechs. In other words, no private firm would do it themselves because they could not compete at first, but over time would grow big enough or learn enough to be competitive if only they had the support to make it there.
Does this argument hold water in this case? Hard to say for sure, perhaps we have more skilled electrical engineers and manufacturers so that if we set our minds to it we would be better and more efficient at it - but we would also have to overcome our relatively expensive labor.
I am skeptical, but of streetcars become the rage in the US, perhaps...