Bipartisan opposition to Nippon Steel’s attempted acquisition of U.S. Steel isn’t about the national interest — it’s largely about winning Pennsylvania.
The Washington Post reports that President Biden will be blocking Japan-based firm Nippon Steel’s attempted acquisition of U.S. Steel. This news came on the same day that U.S. Steel’s CEO told the Wall Street Journal that if the deal doesn’t go through, the company will have to close steel mills and might move its headquarters out of Pittsburgh. CEO David Burritt said U.S. Steel is counting on the $3 billion Nippon Steel pledged to invest in the U.S. to keep its older mills competitive.
The deal became a political issue, but it yielded cross-party agreement. A bipartisan group of senators opposed it, and both Kamala Harris and Donald Trump oppose it as well. We’re supposed to pretend this is about the national interest, when, in reality, it is largely about winning Pennsylvania and about politicians’ unwillingness to cross the United Steelworkers union, which also opposes the deal, in an election year.
It shouldn’t have become a political issue, in part because it simply isn’t very important. U.S. Steel and Nippon Steel are both publicly traded companies. U.S. Steel had been looking for buyers, and Nippon Steel made a much better offer than other firms. Both companies and their shareholders wanted the deal to go through. This sort of thing happens all the time and isn’t particularly remarkable.
Purported national-security concerns are nonsense. Japan is one of America’s closest allies and its top source of foreign direct investment already. Blocking the deal denies greater investment in domestic steelmaking capacity, undermining any benefits for defense production.
Regardless, military needs for steel are at most 3 percent of total U.S. production. And former deputy undersecretary of defense for industrial policy William Greenwalt has said the domestic steel industry failed to deliver for the Pentagon when it needed steel during the War on Terror, in large part because of protectionism that keeps the industry globally uncompetitive and expensive.
Nippon Steel went to considerable lengths to demonstrate its commitment to the U.S. It promised to keep the company’s headquarters in Pittsburgh. It roughly doubled the amount it said it would invest in modernizing U.S. mills after its initial offer was already accepted. It has been working with politicians and union leaders to address concerns. And it promised no layoffs to hourly workers through 2026.
One person who knows about how Japanese investment can help U.S. companies is GOP vice-presidential nominee J. D. Vance. He opposes the Nippon Steel deal, but in his book Hillbilly Elegy, he wrote about how Japanese firm Kawasaki saved Armco, the major employer in his hometown. “If companies like Armco were going to survive, they would have to retool,” Vance wrote. “Kawasaki gave Armco a chance, and Middletown’s flagship company probably would not have survived without it.”
Maybe Nippon Steel wouldn’t have kept its promises, but U.S. Steel on its own isn’t even able to make such promises to begin with. “The U.S. Steel CEO said the expanded Arkansas mill would allow the company to close Mon Valley, the company’s last steelmaking operation in Pittsburgh,” the Wall Street Journal reported. “With more of the company’s production shifting to the South, he said U.S. Steel would likely look to move its headquarters to the region as well.”
So, in a bid to help win Pennsylvania, politicians are essentially making it easier for a big company to leave Pennsylvania. And Republicans and Democrats are in agreement that the property rights of shareholders can be discarded for political purposes in an election year to block a few billion dollars of investment in the U.S. from a company based in an allied country.