While the White House claims it is committed to strengthening American jobs and manufacturing through foreign investment and shifting supply chains to allies, its actions tell a different story. It’s a story where the political demands of reelection reign supreme, and in the case of the Nippon Steel proposal to acquire U.S. Steel, it is acceptable to rig the regulatory process that oversees such foreign investments (the national security review by the Committee on Foreign Investment in the U.S., or CFIUS) to meet the demands of the United Steelworkers union, which opposes the deal.
President Biden even went so far as to tell a gathering of United Steelworkers earlier this year that since “U.S. Steel has been an iconic American company for more than a century…it should remain a totally American company. American owned, American operated, by American union steelworkers — the best in the world. And that’s going to happen — I promise you.” (READ MORE: Trump to Speak at Tech Conference in a Political Landmark for Cryptocurrency)
And why wouldn’t the president make such a promise? Never mind the specific “Exon-Florio” provision of CFIUS’ authorizing laws that commercial investment transactions should be evaluated “free from political considerations,” the president still made those statements knowing full well the Chair of CFIUS is his own treasury secretary, whom he can fire whenever he wants since she “serves at the pleasure and will of the President,” a presidential power the Supreme Court has repeatedly upheld.
Whether serving as Treasury Secretary or CFIUS Chair, Ms. Yellen knows who her boss is, and who signs her paycheck.
The Biden Administration Is Sacrificing Security for Personal Gain
Naturally, the frosting on the cake is that within a week of the first statement by the president, the United Steelworkers endorsed President Biden for reelection. After Biden withdrew from the race, the United Steelworkers were quick to endorse Kamala Harris. She has yet to comment on the U.S. Steel-Nippon deal, but no doubt faces pressure from organized labor to oppose it. These actions aren’t about U.S. national security, they are about the economic and political authority of powerful unions.
At the same time as all this was going on, the Biden administration wisely held a “trilateral defense summit” with Japan and the Philippines to respond to the rising Chinese aggression both towards the Philippines in the South China Sea and towards Japan in the East China Sea. Why then does the Biden administration inexplicably seek to torpedo the Nippon Steel proposal to acquire U.S. Steel?
The fact is, in other areas of national security, like American shipyards, the Biden administration sees no national security threat to Asian allies acquiring U.S. industries.
Hanwha, a South Korean company, recently agreed to purchase the Aker Philadelphia Shipyard, already owned by a Norwegian company. Hanwha specifically sought out this opportunity after being encouraged by Navy Secretary Carlos Del Toro who said “Hanwha’s acquisition of Philly Shipyard is a game-changing milestone in our new Maritime Statecraft.” The deal, like the U.S. Steel acquisition, is subject to CFIUS review. (READ MORE: What a Real ‘Pro-Worker’ GOP Would Look Like)
But with U.S. Steel, the Biden administration undermines similar investment in that same Commonwealth of Pennsylvania from a strong and key Asian ally. Regardless, this is a ridiculous contradiction on the part of the Biden administration. Does the right hand in the White House even know what the left hand is doing?
Japan Is a National Security Ally. It Should be Treated As Such in Steel Deal.
The political abuse of the CFIUS review system reflects a lack of strategic focus while establishing a disturbing precedent of prioritizing politics over the nation’s security.
More importantly for U.S. national security, the U.S. Steel–Nippon Steel deal is a unique opportunity to form a strategic counterbalance to China’s dominance of the steel industry. Currently, six of the world’s 10 largest steel producers are Chinese — including the world’s largest, state-owned China Baowu Group.
Nippon Steel is the fourth largest steel company in the world, but its acquisition of U.S. Steel would catapult it to the second largest. The creation of a close, free-world competitor to the China Baowu Group would be a positive development for competing with China in a critical industry with reach into many sectors of the economy.
That is also why the House Select Committee on the Chinese Communist Party (CCP) issued a recent report recommending that the U.S. develop stronger trade relations and encourage investments with allies like Japan. The report suggests adding Japan to the “whitelist” of Excepted Foreign States, making it easier — not harder — for foreign investment deals like the Nippon Steel–U.S. Steel deal to clear CFIUS review. (READ MORE: How to Pay for Trump’s Tax Cuts)
The U.S. government has recognized Japan as the fundamental national security ally it is in countering the CCP, both through public- and private-sector partnerships. The president shouldn’t put any U.S. national security interests, such as the foreign investment by Nippon Steel in U.S. Steel, under the control of a small interest group.
Bob Carey was a national security advisor to two U.S. Senators, a Senior Policy Advisor to the Secretary of Energy, and a Senior Executive in the Department of Defense. He is also a retired Naval Officer and Executive Director of the National Defense Committee.
