Christmas could come early for the good people of US Steel, if the Biden Administration gets out of the way of a proposed merger between the manufacturing magnate and Japanese investors at Nippon Steel.
For the last year and a half, Nippon Steel has been trying to acquire US Steel, having offered $15 billion for the Pennsylvania-based company, a much sweeter deal than the $7.3 billion offered by Ohio-based Cleveland-Cliffs Steel. Being unable to outbid Nippon, CC has tried to leverage its home court advantage using domestic politics and some good old fashioned swampy D.C. backdoor dealing.
For example, in recent months the Biden Administration has threatened to use the Committee on Foreign Investment in the US (CIFIUS) to block the acquisition of US Steel by Nippon Steel on the basis that such a foreign acquisition could jeopardize national security. This is despite the fact that the departments of Defense, Treasury, and State have all concluded that the deal poses no security at all, according to a recent article by Financial Times, although the departments of Commerce and Energy disagree.
US Trade Representative Katherine Tai seems to be the leading the opposition of the deal though given her close ties to CC, her priorities may be for herself and her friends, not US steelworkers. CFIUS has reportedly drafted an agreement that outlines steps Nippon can take to get this deal done but the US trade representative office continues to be stubbornly opposed. It could be that the lead representative has given multiple speeches to groups directly associated with Nippon’s competitor for this acquisition, Cleaveland Cliffs. It could just be a coincidence but there are never any when it comes to Washington D.C.
Some are also speculating that these developments a revealing a major flaw in the CFIUS process, claiming that if a trade representative with no national security background can halt a deal by claiming “concerns” about national security then the system is a farce.
Top officials from the agencies that constitute CFIUS will meet on Wednesday to debate the issue, leading up to an end of year deadline for recommendations to the president. If they do come back and recommend a block, they are essentially forcing the U.S. government to put in writing that Japan is a national security risk, damaging our credibility on the international stage.
All this is regardless of the fact that Japan is our No. 5 trade partner with an annual $147 billion exchanged between our two countries – who have not been at war for (let me double check) 80 years.
Someone else who’d like the deal to not go through is our friends in China, with whom we’re sort of at war right now. As part of their stated goal to replace us as the world superpower, Beijing flies spy balloons over our mainland, steals our technology, buzzes Taiwanese airspace, conducts drills with Russia, and wants to blow up our battleships.
Strengthened ties between Japan and the US undermine Chinese economic strength. A merger between US and Nippon Steel the third-largest steel company in the world. Currently, China produces about 55 percent of global steel, and their output has surpassed 1 billion metric tons since 2020. In 2023, exports increased by 35 percent to 90 million tons dwarfing the production of both the United States and Japan combined.
So, anything to push back on this area of Chinese dominance is probably good in the long run.
However, this has proven to be a unique issue where both the Biden-Harris Administration and once and future President Donald Trump agree. Trump has vowed to kill the deal when he gets in office, but it could be an example of him threatening action to get a more desirable outcome. Trump threatened to pull out of NAFTA unless he could get a better NAFTA for America; he put a travel ban on Sudan until the country joined the Abraham Accords.
The aforementioned Financial Times article suggests Trump might be threatening to kill the deal to squeeze a better deal out of Nippon, then take credit for it as (yet) another accomplishment before he even re-took office.
However, last week Nippon told workers at US Steel that it would give each employee a $5,000 bonus when the deal goes through, which seems like it would be a pretty cool Christmas present.
Let’s hope the government stays out of the way and lets these two companies merge.
Jared Whitley has worked in the US Senate and White House. He has an MBA from Hult business school in Dubai. Recently the Top of the Rockies competition named him the best columnist in the Intermountain West.
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