At least the USA isn’t the only country with idiotic procurement rules:
In the mass-transit business, purchasers want to buy the best equipment at the best price. But they face intense political pressure from the governments that finance these megaprojects to steer contracts to local companies, and workers. Bombardier – like its German, French, Spanish and Japanese rivals in the rail business – knows how to play the national card. That’s why Bombardier engineered a series of European and U.S. acquisitions in the 1980s and 1990s. And that’s why it assembles rail cars in the tiny border town of Plattsburgh, N.Y.
Within Canada, Bombardier splits rail work between its main plant in La Pocatière, Que., and a second plant nearly 2,000 kilometres away in Thunder Bay, to help secure contracts in Canada’s largest province. Alstom is building its own plant in Sorel, Que., to do the Montreal Métro work. It is the taxpayers who are paying for this needless production redundancy.
Wouldn’t it be nice if those surplus workers could be put to work instead building new track?
It seems that the bigger natural transit market you have, the better you can get away with procurement protectionism. As I understand, Japan has pretty strict de facto protectionist policies, and yet they clearly do alright. Obviously they could do better, but the hit they take probably isn’t as big as the hit we take here in the US, where there’s such a small (and incompetent) number of buyers.
It’s even worse than you think.
And Stephen, the reason Japan does alright is that its internal market is enormous, so that there’s a lot of domestic competition. The domestic US industry did okay under protectionism too when the market was large, but made defective products in the 1970s when the market had shrunk.
There’s another dynamic at work that pushes in the same direction – as the technology evolves, develeping and manufacturing gets comparatively more expensive. This diminishes number of suppliers as the weakest ones either go bankrupt or get merged by strong ones.