While Kamala Harris and Donald Trump seemingly disagreed on practically everything having to do with governing this country during their campaigns, both of them repeatedly remarked that the government should not allow the proposed merger between Nippon Steel and U.S. Steel.
Everyone understood that the reason for their vehemence was the simple fact that Pennsylvania, where U.S. Steel is located, was the crucial state for the 2024 presidential election, and both parties sought to curry favor with the union and the residents who feared that a merger might reduce employment and the state’s economic clout.
However, that political exigency no longer exists, and a more practical one must now be confronted: The best way to preserve domestic steel production--which has important economic and defense considerations for the U.S.--would be to allow the merger to go through. President Biden can and should do such a thing before he leaves office.
The Committee on Foreign Investment in the U.S. (CFIUS) must approve the Nippon Steel takeover, and the Administration has dragged out the process through 2024--presumably because releasing its recommendation before the election would have invariably injected more political uncertainty into the campaign and the ultimate decision than is already the case.
It now appears likely that CFIUS will soon signal its approval of the transaction, for the simple reason that it would unambiguously benefit the economic and military security of the United States. For starters, Japan is a key ally of the United States, and there is no inherent possibility that Nippon Steel would have a reason to deny the U.S. access to steel produced in the mills it owns in the U.S. In fact, the very reason it desires to enter the domestic market is precisely to increase its sales in the U.S.
The other reason for the transaction to be approved is that the U.S. could simply nationalize the production facilities of Nippon Steel should there ever be a scenario in which it refused to sell to the U.S. Nationalizing steel production is not even an unprecedented act--Harry Truman did just such a thing during the Korean War. It’s certainly not as if Japan can move U.S. steel mills overseas.
After the imminent CFIUS recommendation, President Biden will have fifteen days upon which to make his final decision on the merger. While he repeatedly inveighed against the takeover while he was a candidate and even after he withdrew from the presidential campaign, in Mid-September the Administration extended the CFIUS review period until early December--ostensibly give the parties involved a chance to convince the Committee that the takeover did not pose potential foreign policy concerns.
Historically, presidents have rarely rejected the committee’s recommendation--since the advent of CFIUS in the waning days of the Reagan Administration, an administration has rejected CFIUS’s recommendations just eight times, and each of those had something to do with worries concerning the Chinese government’s access to sensitive technology.
Ironically, the most potentially problematic outcome for defense and foreign policy considerations would be a rejection of the deal, which would almost certainly engender a crisis in the Japan--U.S. relationship. If the Biden Administration were to reject this takeover, it would essentially be treating Japan--the country’s most important Asian economic and defense partner--akin to China, and send a chilling signal across the globe to all of our country’s other partners that following through on short-term political exigencies take precedence over long-term security relationships.
President Biden has no obligations to anyone but the American public to do what is best for the country, and doing such a thing would entail setting aside his campaign rhetoric about the Nippon Steel--U.S. Steel merger and approving it once it arrives on his desk.
