Washington, DC—The Eno Center for Transportation released on Wednesday a new report analyzing the proposed ban on using federal funds to purchase mass transit vehicles produced by Chinese state-owned enterprises. “The Implications of the Federal Ban on Chinese Railcars” concludes that until the federal government better understands the potential national security risks of using Chinese railcars in American transit systems, a one-year appropriations ban is more appropriate than a permanent policy change.

“As the trade war between the United States and China escalates and concerns over our national security mount, American cities find themselves caught in the crossfire,” said Robert Puentes, President and CEO of Eno. “Given the competing interests of cities that want to invest in their transit systems at a low cost and a federal government that wants to protect domestic manufacturing, we hope this report will help policymakers understand the trade-offs and make informed decisions.”

The U.S. House and Senate have both passed transportation appropriations bills which include language prohibiting the use of certain Federal Transit Administration funds to procure mass transit railcars from companies owned or subsidized by the government of the People’s Republic of China.

While the two provisions are different and still need to be reconciled, they both clearly target CRRC Corporation Limited, the world’s largest supplier of rail transit equipment. CRRC has in recent years won contracts for new rail transit cars in major American cities like Boston, Chicago, Los Angeles, and Philadelphia by underbidding its competitors by tens of millions of dollars and by committing to build manufacturing facilities and create jobs in those localities.

Separately, the new defense authorization law requires the Department of Homeland Security to assess the national security implications of Chinese-manufactured transit given the proliferation of advanced electronics components in new transit vehicles.

Proponents of the ban say CRRC is able to underbid other manufacturers due to the heavy subsidies it receives from being a state-owned enterprise and point to American freight railcar manufacturers as its next target. (While there are no American transit railcar manufacturers today, there are several American freight railcar manufacturers.) They also cite national security concerns, which are the subject of the aforementioned DHS study.

On the other hand, opponents of the ban say cities have reaped the benefits of low bids, which allow them to invest in their transit systems at a lower cost to taxpayers. CRRC, they say, has also created manufacturing jobs in those cities and has adhered to local priorities such as helping disadvantaged workers.

The report suggests that there are key differences between mass transit and freight railcar purchasers, and thus they should be considered separately. The report further finds that while CRRC would pose a “real and credible threat” to domestic freight railcar manufacturers if it entered the U.S. freight railcar market, more information is needed on the national security implications.

Read the report here.