Report stokes xenophobia to oppose Japanese purchase of U.S. Steel

OPINION:

The geopolitical consulting firm Horizon Advisory is making headlines with its report warning against the purchase of U.S. Steel by Japan’s Nippon Steel. The business management consultant warns that the sale will leave America vulnerable because Nippon does a tiny fraction of its business in China, a case anchored in sand rather than concrete.

The Horizon report forges elements of the Red Scare with 1980s Japan bashing into a xenophobic alloy. Its objections boil down to “they all look alike,” ignoring that Tokyo is bound to America by treaty and that Nippon Steel has promised to preserve jobs and union contracts as well as what Nippon calls “the iconic U.S. Steel name.”

Japan is an island nation with sparse natural resources. To succeed, its industries must invest in foreign markets. Far from starving China of iron ore, canceling the U.S. Steel purchase may only encourage Nippon Steel to invest more in Baowu Group, which Horizon refers to three times as Beijing’s “steel ‘aircraft carrier.’”

Buried in all the dark language and innuendo — featuring a photograph of Chinese Premier Deng Xiaoping visiting Nippon’s Japanese operations 50 years ago — Horizon’s report acknowledges that Nippon’s facilities supply less than one-half of 1% of China’s steel.

Nippon Steel, calling Horizon’s report “rife with inaccuracies and misrepresentations,” notes that its operations in China are “very limited” and amount to less than 5% of the company’s worldwide capacity. If any aircraft carriers are to be built from that trickle of molten steel, they’ll be on the scale of Barbie’s pink convertible.

The rest of Horizon’s evidence is just as weak. “Nippon has appeared to receive favorable treatment from Chinese industrial policy incentives,” it states. The key word is “appeared,” which shows up three times in the brief report — one of many qualifiers.

Horizon alleges that what it calls Nippon’s “integration in China’s steel sector” means it “feeds” China’s naval buildup, but their primary venture? Producing steel sheets for automobiles. Rep. Mike Gallagher, Wisconsin Republican, said, “I don’t think there’s a national security concern at all,” but many of his colleagues need convincing.

Citing Horizon’s report, Sen. Sherrod Brown, Ohio Democrat, urged President Biden “to thoroughly investigate the allegations … and examine Nippon’s ties to the Chinese government and the danger this merger poses to American national and economic security.”

The word “ties” is a favorite rhetorical sleight of hand. When combined with U.S. Steel, Nippon would be the second-largest producer in the world, so it’s already massive. It couldn’t have grown so large without at least some contact with the world’s No. 2 economy, which happens to live next door.

Horizon’s report states that the United States must “maintain the ability to surge and mobilize whenever today’s uncertain global environment may demand.” Still, the Korean War-era Defense Production Act already provides that ability, giving Washington broad civil defense and war mobilization powers.

In the throes of the pandemic, then-President Donald Trump and President Biden both invoked the act. In the event of war with China, either can direct U.S. Steel, whoever owns it, to “allocate materials, services, and facilities” for defense. Of course, Japan is all but guaranteed to be an American base of operations in such a conflict, just as it was in Korea in opposition to China.

“By fostering stronger integration among allied economies,” as the House Select Committee on the Chinese Communist Party wrote, the free world “can collectively boost their economic resilience and reduce their vulnerability to the PRC’s predatory economic practices.”

Nippon’s track record of modernizing and operating several other American steel facilities promises that this key industry will be stronger, not weaker, if a future conflict manifests. They promise to “bring additional resources and expertise to support investment in American steel while also accelerating innovation, decarbonization, and digitization at U.S. Steel.”

On its website, Nippon lays out its case for “Moving Forward Together as the ‘Best Steelmaker with World-Leading Capabilities,’” but Mr. Trump says he’d block the deal — and Mr. Biden that he wants Americans to own U.S. Steel. Never mind that Nippon already purchased all those other American mills without any objection being raised.

“Why the bipartisan hostility toward Nippon Steel deal?” former GOP presidential candidate Steve Forbes asked. “Friendshoring is better than offshoring,” and Japan is a friend of 80 years in good standing. If Nippon makes the best offer, isn’t it better than going in search of a buyer who may gut the company to make it profitable?

Horizon’s report ends with a statement that “American industrial might needs strategic distance and isolation from Beijing’s industrial influence levers.” Having a friendly company of Nippon’s resources will provide that buffer, keeping jobs in the United States and rejuvenating a crown jewel of our domestic steel industry.

It’s a win-win, provided xenophobic shouting doesn’t drown out the whisper of incontrovertible facts.

• Dean Karayanis is content producer for “The Clay Travis & Buck Sexton Show,” a former Rush Limbaugh staffer, and the host of “History Author Show” on iHeartRadio.