Biden wrong to block sale of U.S. Steel to Nippon Steel
On Friday, President Joe Biden announced he was blocking the purchase of U.S. Steel by Japanese steelmaker Nippon Steel on dubious economic and national security grounds.
“It is my solemn responsibility as President to ensure that, now and long into the future, America has a strong domestically owned and operated steel industry that can continue to power our national sources of strength at home and abroad; and it is a fulfillment of that responsibility to block foreign ownership of this vital American company,” Biden announced.
The deal that Biden blocked would have resulted in Nippon investing nearly $3 billion in U.S. Steel’s union-represented facilities, notes Scott Lincicome of the Cato Institute. “Steel buyers and industry experts in the United States supported the deal because they believed it would improve both US Steel and the domestic steel market,” explained Lincicome in a blog post for Cato. “The transaction was backed by thousands of US Steel employees, more than 98 percent of its shareholders, and an independent arbitration panel chosen by the company and the United Steelworkers (USW) union.”
A review by the Hudson Institute concluded that the deal “would advance American economic, national security, and political interests at a time when the needs for secure domestic steel production and supply chains are paramount.”
In response to the specific concern that allowing a Japanese company to own a steel company in the United States posed a national security threat, the researchers at the Hudson Institute point out the obvious: Japan is a close ally of the United States.
“Japan hosts more than 50,000 American troops, will increase its defense spending to 2 percent of gross domestic product by 2027, and is a key customer and joint production partner for key American defense priorities, missiles for air and ballistic missile defense, aircraft, and ship repairs,” they note. And in practice, Japan is a helpful economic counterbalance to China. That Nippon Steel planned to invest billions into U.S. Steel facilities and share research and development funds would have been to America’s benefit.
But President Biden just can’t figure out any of this. Instead, he chose one of his last presidential acts to be an exercise in executive overreach.
“By intervening in the private business affairs of the two companies, Biden is demonstrating once again his expansive view of executive power, hubristic sense of government’s ability to order economic affairs, and willingness to stretch the definition of ‘national security’ to justify his big government agenda even when there is plainly no national security threat,” argued Reason Magazine’s Eric Boehm in response to the news.
As both Boehm and Lincicome point out, the grounds for the denial are hollow. Biden invoked national security because it sounds serious, but there’s no real substance behind it.
As Boehm notes, “even the Committee on Foreign Investment in the United States (CFIUS), a shadowy entity created during the late stages of the Cold War to review potential economic threats to the country that’s metastasized into an all-purpose mechanism for presidents to control American companies’ deals with foreign firms, declined to label the deal a threat.”
So what we have, then, is Biden smacking down a good deal, a transaction between private entities and doing so in the name of something he can’t actually justify.
President Biden might mean well, but he’s dead wrong about this.