By: Nancy McLernon, president and CEO of the Global Business Alliance
President Joe Biden’s recent opposition to the Nippon Steel-U.S. Steel deal not only signals a worrying continuation of his predecessor’s protectionist policies, it casts a long shadow over an economic foundation that has bolstered U.S. prosperity for decades. Forget the esoteric economic arguments and unmoored claims of vague national security concerns. The driving force behind this blatantly political move is simple: President Biden is terrified of losing union support to Mr. Trump in battleground states like Pennsylvania.
Any other rationale is simply implausible.
After all, Japan’s role as our nation’s top investor is undeniable. Contributing 15 percent of America’s total cumulative foreign direct investment, Japan has shown its commitment to the U.S. economy, increasing its investments by 55 percent over the last five years. In 2022, this amounted to a staggering $775 billion. Japanese-headquartered companies in the U.S. support nearly a million American jobs – including in U.S. steel mills – a clear indicator of the depth of this valuable economic partnership.
The United States has a long-established process for reviewing cross-border deals to safeguard our national security. It is known as the Committee on Foreign Investment in the United States (CFIUS), and its power was strengthened significantly under President Trump. Its review of the Nippon deal began last week.
President Biden’s preemptive strike on that review of the Nippon Steel deal not only threatens the direct benefits that the deal offered U.S. workers, it undermines the integrity of the CFIUS process and sends a strong signal to international investors that the U.S. no longer supports market-driven outcomes.
The importance of maintaining an open and attractive investment climate cannot be overstated. International companies, including those from Japan, significantly contribute to the U.S. economy, especially in sectors like iron and steel. These companies not only make up 24 percent of the total workforce in this sector but also offer higher wages than the U.S. average, underscoring the quality of jobs they create.
It may be President Biden's pen that ultimately unwinds the Nippon deal, but clearly, Mr. Trump’s bombastic rhetoric forced his hand.
The opposition to the Nippon Steel-U.S. Steel deal contradicts President Biden’s commendable Open Investment Policy Statement issued in 2021, where he pledged fair and equitable treatment for all investors and reinforced the U.S.’s commitment to being an attractive destination for global business. His new position risks damaging the U.S.-Japan economic and strategic partnership. Such a move is out of line with the broad public support for maintaining and strengthening ties with Japan, a country considered an ally by more than three-quarters of Americans.
It may be President Biden’s pen that ultimately unwinds the Nippon deal, but clearly, Mr. Trump’s bombastic rhetoric forced his hand. Ironically, their political pandering likely just killed the best chance of preserving those steelworker jobs in Pennsylvania.
After all, U.S. Steel has remained a distressed company despite enjoying the protection of Trump-era tariffs for the better part of a decade. No other serious bidders could clear the anti-trust hurdles that are present.
The U.S. stands at a crossroads. It can either continue down a path of economic isolationism and damaged relationships with key allies or it can choose to uphold the principles of American prosperity, international cooperation and strategic economic alliances.
To safeguard America’s economic future and its critical alliances, especially with Japan, U.S. workers should demand their political leaders prioritize long-term economic health and strategic relationships over shortsighted special interest gains. The economic alliance between the U.S. and Japan deserves more than to be a casualty of political gamesmanship.