OPINION:
Conjecture that a U.S. government review of Japan-based Nippon Steel’s proposed acquisition of United States Steel Corp. is de facto protectionist misses the mark entirely. Attempts to further immunize the transaction by highlighting the ally status of Japan are also beside the point.
The central purpose of a review is to determine impacts on national security, a critical mission. In cases where the corporate origin is China, there is a much stricter standard of scrutiny. But every transaction with a possible security impact necessitates review.
In this case, a close look at global steel production provides a window. According to the World Steel Association, six of the top 10 global steel-producing companies are based in China. Nippon Steel is listed as No. 4.
There are no American companies in the top 10. The highest-ranking one is North Carolina-based Nucor Steel, at No. 16. If Nippon gains control of U.S. Steel (No. 27), the only American companies left in the top 30 will be Nucor and Cleveland-Cliffs (No. 22). This statistic should be alarming to the U.S. military.
National security reviews are conducted by the Committee on Foreign Investments in the United States, known as CFIUS, an interagency group chaired by the Treasury Department. The acquisition of real estate or infrastructure by a foreign entity are the most easily identifiable threats.
Technological advances have expanded the substantive categories of concern for CFIUS. And the Biden administration has specifically identified China as a country of concern.
In the instant case, proponents have relied heavily on Japan’s status as an ally, particularly as a bulwark against China. But Japan hasn’t been designated as an “excepted foreign state” from CFIUS review. If this deal is consummated, it’s likely that the parent company’s behavior would be motivated by capitalism.
In relatively stable global circumstances, most corporations strive for profit. However, let’s turn the calendar back to 2020. When a global pandemic hit, every government rightly prioritized the welfare of its own citizens and directed its companies accordingly. Here in America, the scarcity of personal protective equipment and lifesaving machines such as ventilators is well documented.
The inability to procure emergency goods here was traced back to America’s excessive reliance on China, the origin and epicenter of the pandemic. In addition to common retail merchandise, China became the production hub for critical medical equipment in the pre-COVID era. During the pandemic, senior U.S. officials were left to plead with allies for the supplies needed to save American lives.
Even friendly partner nations were unable to meet American requests due to their own exigent circumstances. Both Presidents Trump and Biden invoked the Defense Production Act, a law that permits the president to direct companies to prioritize goods needed for national security.
Congress previously recognized the inability of domestic industries to access materials as a threat to national security in Section 232 of the Trade Expansion Act of 1962. Mr. Trump invoked this provision in 2018, requesting an investigation of steel and aluminum imports. It was determined that overcapacity hindered the ability of domestic producers to meet the needs of domestic defense.
Pursuant to the law, tariffs on steel and aluminum imports were imposed as an interim corrective measure. Overlooked by many critics of this action was that Chinese exports of these materials came to the U.S. through third countries. The Biden administration opened its own Section 232 investigations of steel and aluminum and retained the previous tariffs in various formats.
As the pandemic has receded under the Biden administration, the geopolitical landscape has erupted. There are wars in Ukraine and Israel with Chinese hegemony on the horizon. America is under siege as well, with over 100 attacks on U.S. troops in Iraq and Syria.
The U.S. military falls short of the strategic numbers of equipment previously identified to maintain “peace through strength,” much less prevail if attacked. To build back full military capacity in order to meet existential defense needs, relying on anyone else, even an ally, compromises the national security of the American people.
Suppose Nippon Steel takes control of U.S. Steel. Then imagine that regional conflicts spark a global catastrophe in which America requires large amounts of steel to build weapons and infrastructure for the defense of its citizens.
Simultaneously, Japan, currently with far less military equipment than the United States, needs the same. Now, review the new list of top global steel producers.
• Manisha Singh is founder and principal of Sunstone Strategy Group. She served as assistant secretary of state for economic and business affairs from 2017 to 2021.
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