The Dubious Behavior That Undermined the U.S. Steel-Nippon Steel Merger
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President Biden’s announcement on Friday to block Nippon Steel’s acquisition of U.S. Steel is a political decision, not one rooted in law or facts. In his announcement, Biden provided no evidence of national security risks and failed to acknowledge the significant commitments made by Nippon Steel that would boost steel production and employment in America. 

It is worth noting that throughout this process, the objections brought forth by the most adamant opponents of the deal--namely, United Steelworkers president David McCall, Cleveland Cliffs president Lourenco Goncalves, and the United States Trade Representative Katherine Tai--appear disingenuous at best and suggest the Committee on Foreign Investment in the United States (CFIUS) process has been corrupted. 

For over a year Dave McCall, head of the United Steelworkers Union, has voiced his loud opposition to the deal, insisting that the new company--which would expand its U.S. output--would not be beneficial to its members. However, his opposition has been unyielding despite numerous promises by Nippon Steel to maintain employment levels and the current contract. For instance, McCall responded this week to an unprecedented pledge by Nippon Steel to maintain production at the current levels or above for the next decade in six states with derision, dismissing it as little more than a Hail Mary pass. 

But the employment promises have earned the support of many union steelworkers, who have written letters and organized rallies in support of the deal. The possibility that U.S. Steel would close its oldest mill absent of the merger without a fresh infusion of investment from Nippon Steel also serves to motivate support for the deal among the rank and file. 

The gulf between steelworkers and union leadership is unusual, to say the least, and McCall’s refusal to consider his membership’s support for the deal is puzzling. 

It is easy to see why the head of Cleveland Cliffs, a competing steel manufacturer, would oppose the deal: A more capitalized competitor would be able to produce steel more efficiently, driving down prices--bad for them but good for steelworkers, the new U.S. Steel, and the U.S. economy. But a failed merger could potentially allow it to acquire some or all of U.S. Steel at a price below what Nippon Steel currently has on the table. It will also effectively establish a monopoly for Cleveland Cliffs.

Lourenco Goncalves’ vocal and persistent lobbying to stop the merger--which some have described as quite effective--has gone well beyond the typical CEO actions. For instance, a PR firm hired by Cleveland Cliffs when it attempted to purchase U.S. Steel in 2023 (its bid was at least $6 billion below Nippon Steel’s) has continued to send news clips and other reports that denigrate the odds of the merger passing, which has included negative statements coming from the union. 

When U.S. Steel initially solicited merger partners in 2023, Cleveland Cliffs’s bid was not only well below Nippon Steel’s bid but it was also far from apparent whether it could actually raise the money needed for the deal. Cleveland Cliff’s finances are a bit shaky at the moment and antitrust authorities would have surely objected to a deal that would create a single domestic producer of rolled steel, which domestic car producers depend on.

What’s puzzling is why David McCall has completely aligned with Cleveland Cliffs on this--and many other--matters. A Cleveland Cliffs monopoly in the rolled steel market would inevitably lead to less steel being sold by the combined operation, which would result in fewer jobs in the steel mill, and it is not clear that a U.S. Steel--Cleveland Cliffs merger that did go through and divested substantial assets to other steel producers would benefit workers either. 

Another voluble opponent to the deal with questionable motives has been Ambassador Katherine Tai, the United States Trade Representative, who played a critical role in allowing the President to have the option of rejecting the merger in the first place. The sole purpose of the CFIUS panel is to determine any national security risks and the key experts in this arena--Justice, State, Defense, and Treasury--have expressed no national security concerns. Tai's public objections to the deal have centered upon labor concerns--she’s repeatedly stated that a Nippon--U.S. Steel combination may not lobby hard enough for trade protection if imports increase--which is not only ridiculous but also completely outside the scope of SFIUS’ purview. It’s also telling that while she has also indicated her fears that this will hurt labor, the Department of Labor, also a member of the CFIUS panel, has publicly supported the merger. 

The reality is that the attempts by Cleveland Cliffs and the leadership of the United Steelworkers Union to stymie the transaction are rooted more in their own short-term gains than the best interests of steelworkers or the health of the domestic steel market. In fact, the entire episode has a distinct stench of crony capitalism and has done irreparable harm to the CFIUS process while also setting a dangerous precedent for any future economic cooperation between the U.S. and its closest Asian ally, namely Japan. 

President-elect Trump will hopefully see that the Nippon and U.S. Steel deal is the best path forward and has an opportunity to be the savior for the 8,100 American steelworkers whose jobs are now at risk.

Ike Brannon is a senior fellow at the Jack Kemp Foundation. 


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