Think of the consequences of a failed deal for U.S.–China competition and American jobs.
Commentary
Most leading Washington politicians want to block Japan’s Nippon Steel from buying U.S. Steel. It’s a quintessentially American company headquartered in Pittsburgh. Keeping U.S. Steel American has a logical ring to it. Admittedly, merging the United States’ eponymous steel company with Nippon could make us look weak to some. Japan protected its own steel industry, which gives us more than enough rights to protect ours from Japan.
The Committee on Foreign Investment in the United States (
CFIUS) notified both U.S. Steel and Nippon of its national security concerns, which CFIUS says cannot be allayed by various proposed compromises such as asset sales.
However, independent analysts rightly question CFIUS’s conclusion about a deal that would create the world’s third-largest steelmaker better equipped for global competition with China. The combined company would straddle the globe and bring U.S. Steel from its current $18 billion revenue to a whopping $80 billion, including billions in investments to modernize U.S. Steel blast furnaces and make U.S. Steel jobs more secure.
If the deal falls through, thousands of
Pittsburgh workers, including blue-collar and white-collar workers employed indirectly, will likely lose their jobs. U.S. Steel shareholders will also lose.
Nippon offered to buy the company for $14.9 billion. All of the top shareholders are U.S. companies. Much of that money would be reinvested in American industry, especially after U.S. Steel gets this “
vote of confidence” from a Japanese company. Other global capital will be attracted to the United States as well by smoothly facilitating an international deal between allies under fire from domestic interest groups. If the deal goes awry, Japan will get insulted by the blockage, and global capital will feel an unwelcome chill blowing in from Beltway politics.
Nippon Steel is, in any case, not “Japan” but a
publicly traded company. Americans can buy Nippon shares on Japanese stock exchanges and become Nippon owners. We can also buy Nippon American Depository Receipts (ADRs) on U.S. stock markets, as with most foreign stocks. So the idea that Nippon is a purely Japanese company is incorrect, given that foreign companies and entities, including the United States, own some of its stock.
Nippon’s offer is double that of another American steel company,
Cleveland-Cliffs Inc. According to The Wall Street Journal, “A Cleveland-Cliffs merger with U.S. Steel would have increased market power to raise prices since it would control 100% of U.S. blast furnace production, 100% of domestic steel used in electric vehicle motors, and 65% to 90% of other domestic steel used in vehicles.”
That is too much power for one steel company to wield against consumers. The United States and free markets need multiple companies producing domestic steel to take full advantage of the market competition, which makes our economy efficient.
In addition to the $14.9 billion purchase, Nippon’s offer includes
$2.7 billion to modernize aging U.S. steel plants; $1 billion is earmarked for the Pittsburgh area. That’s about $17.6 billion that Japan wants to invest in the United States.
Refusing that money is ill-advised, not least because it will snub an important U.S. ally. It will hurt U.S. bargaining positions on other matters, including controls that we want Japan to impose on computer chip technology that China wants to buy. This all problematizes job and national security arguments against the deal.
Nevertheless, Nippon has graciously humored these arguments by
promising to hire U.S. citizens to manage U.S. Steel.
Nippon promised to guarantee the union’s contract and forego plant closures and layoffs. Nippon promised the union to protect worker benefits, job security, and workplace rules.
The
Wall Street Journal,
Bloomberg, and The
Washington Post all want Nippon to invest in the United States. Public-spirited leaders on both sides of the aisle support the deal. Vice presidential candidate
Tim Walz and former Trump administration official
Mike Pompeo are two of the most prominent. Both political parties should take their lead by looking past domestic interest groups. Think of the consequences of a failed deal for U.S.–China competition and American jobs.
China cracks down on its unions, which is partly why its wages are low enough to attract global investment. That global investment then pushed up Chinese wages as a whole and pushed down U.S. wages as U.S. industry fled to cheaper labor abroad.
Yes, we should pay a bit more for American steel, because U.S. wages are higher than Chinese wages. Yes, we should protect the U.S. steel industry from artificially low Chinese imports. But certain privileged classes of workers should not be allowed to push their factories into unprofitability and bankruptcy, which hurts other U.S. workers and consumers, including by threatening thousands of jobs in Pittsburgh.
The Nippon offer to modernize U.S. Steel is one good step toward saving U.S. jobs and reindustrializing the United States after decades of damage from cheap Chinese steel imports. It’s time to partner with Japan’s capital and American know-how instead. Bring back the once-great U.S. Steel, backed by more than $17 billion of new money invested in U.S. factories, on U.S. soil, for American jobs.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
