OPINION:
President Biden’s decision to block Nippon Steel’s acquisition of U.S. Steel on national security grounds will have disastrous consequences for some Pennsylvania steelworkers, who will lose their jobs and won’t be able to pay their mortgage or rent or support their families.
The decision should be reconsidered.
It was made on national security grounds, and copied from a decision blocking a Chinese acquisition of an American company. The original title of the order, before the White House corrected it, was “Regarding the Acquisition of Certain Real Property of Cheyenne Leads by Mineone Cloud Computing Investment I L.P.”
Being wrong is unfortunate; being incompetent is a crime. It’s one thing to confront an enemy, and quite another to stab a friend in the back. Unlike China, Japan is one of America’s strongest allies.
To say that “There is credible evidence that leads me to believe that (1) Nippon Steel … might take action that threatens to impair the national security of the United States” is just not believable.
Japan is not only an ally but also the largest foreign employer and investor in the United States. Japanese companies in the U.S. employ about 1 million Americans — half in manufacturing. Japan’s direct investment in the U.S. is over $700 billion. Americans are happy to drive Toyotas and Hondas that were made in America.
Just as Japanese car companies are creating jobs, Nippon can do the same in the steel industry. Japan will keep U.S. Steel running, so America will continue to have steel production. The U.S. government needs to stand by our own workers in Pennsylvania and our ally Japan.
Twenty Pennsylvania mayors sent a letter to Mr. Biden supporting the deal and opting that Nippon Steel plans to increase investment in U.S. Steel, creating thousands more jobs.
With free trade, as in other economic policies, the key is looking at what contributes to our economic strength.
Our current trade policies with China do not contribute to our economic strength. There is no reciprocity in trade with China, because American companies are not permitted to own 100% of Chinese companies, to list on the Chinese stock markets or to operate social- media companies in China.
But Japan is our friend and our closest trading partner, so this deal would actually aid national security. The U.S. needs foreign investors to expand its manufacturing base, specifically for military goods. Secretary of the Navy Carlos Del Toro has called for Japan and South Korea to invest in U.S. shipbuilding on these grounds. With the Nippon Steel decision, Mr. Biden has contradicted his Navy secretary.
The process of this politically motivated decision was riddled with flaws.
The president has the authority to block such acquisitions upon “credible evidence” of a national security threat upon recommendation by the Committee on Foreign Investment in the United States, or CFIUS.
The Nippon deal was being examined by the CFIUS at Mr. Biden’s behest until last month, when the committee stated that it was divided on the deal.
But employing CFIUS to block such acquisitions is rare. It has occurred only once before 2012, twice under President Barack Obama and four times under President Donald Trump. All but one of these blocked acquisitions by CFIUS involved Chinese investors.
It is even more unusual for a president to preemptively ask for a CFIUS investigation as Mr. Biden did shortly after the Nippon-U.S. Steel announcement. Justifiable concerns arise with foreign direct investments from hostile nonmarket economies, but Japan is the opposite.
In a joint statement, Nippon Steel and U.S. Steel decried the decision and the corruption of the CFIUS process. Nippon had offered CFIUS veto power over any potential cuts to U.S. Steel production capacity for 10 years.
The actual political dynamics are more nuanced than they might appear. The United Steelworkers union and Mr. Biden oppose the deal.
Although Mr. Biden has the support of union leadership, Mr. Trump won nearly half of union households in the November election.
Mr. Biden’s decision shows the folly of stupidity masked in the cloak of national security. It will cost workers their livelihoods, just as his decision to mandate and subsidize electric vehicles has led to layoffs at General Motors, Ford and Stellantis. It is a sign of sclerotic thinking as well as a corrupt and politically motivated process. Let’s hope that it will be litigated and reversed.
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Diana Furchtgott-Roth, former chief economist at the Department of Labor, directs the Center for Energy, Climate and Environment at The Heritage Foundation. Andrew Hale is Heritage’s Jay Van Andel senior trade policy analyst.
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