US steel acquisition proposal tests Biden’s industrial policy

US steel acquisition proposal tests Biden’s industrial policy

US steel acquisition proposal tests Biden’s industrial policy

US Steel is an iconic example of the loss of manufacturing power that President Biden says his economic policies will bring back to the United States.

But last month, the famous but diminished company announced plans to be bought by a Japanese competitor. The development has put Mr. Biden in a delicate situation as he tries to balance attempts to revitalize the country’s industrial sector with his efforts to rebuild international alliances.

Mr. Biden’s administration has expressed some unease with the deal and is currently reviewing a proposed $14.1 billion takeover bid from Japanese company Nippon Steel. The company offers a significant bonus for US Steel, which struggled to compete with a flood of cheap foreign metals and was weighing the buyout offers for several months.

The proposal quickly became a high-profile example of the tough policy choices Mr. Biden faces in his effort to revive American manufacturing, a choice that could test how far he is willing to flex presidential power in pursuit of that which is undoubtedly its main objective. economic objective: the creation and maintenance of well-paying unionized manufacturing jobs in the United States.

Mr. Biden is facing pressure from the United Steelworkers union and populist senators from both parties, including Democrats defending crucial seats in Ohio and Pennsylvania this fall, to cancel the sale on national security grounds. The senators say domestic steel production is essential to American manufacturing and supply chains. They warned that foreign ownership could be more likely to move U.S. steel industry jobs and production overseas.

“It really should be a no-brainer,” Sen. Josh Hawley, Republican of Missouri, said in an interview last week. “I don’t know why it would be hard to say, gosh, we need to keep steel production going in this country, and especially at a company like this, where thousands of workers are in good union jobs. “

U.S. Steel executives say the deal would benefit workers and give the combined companies “leading capabilities” in steel production. They announced last month that Nippon Steel had agreed to keep the company’s headquarters in Pittsburgh and honor the four-year contract collective agreement which the metalworkers union ratified in December 2022.

Other takeover supporters say blocking the sale risks angering a key U.S. ally. Mr. Biden sought Japan’s collaboration on a wide range of issues, including efforts to counter Chinese manufacturing in clean energy and other emerging technologies, and welcomed Japanese investments in new manufacturing facilities American, particularly for advanced batteries.

Wilbur Ross, a former steel company executive who served as Commerce secretary under President Donald J. Trump, written last week in the Wall Street Journal, there is “nothing in the deal that the United States needs to defend itself against.” Attacks by Polish officials in Washington only create unnecessary geopolitical tensions, and these, not the acquisition itself, could endanger US national security.”

Adding to the cross-pressure on Mr. Biden: It’s unclear what would happen to U.S. Steel, a 123-year-old company, if the administration scuttles the deal and whether it would actually guarantee greater job security for the near future. of the company’s 15,000 North American employees. .

US Steel has faced challenges for decades due to increasing foreign competition, particularly from China, which has flooded the global market with cheap, state-subsidized steel. American presidents I spent years to support and protect domestic steel producers through a mix of subsidies, import restrictions, and so-called “Buy America” requirements for government purchases.

“No U.S. industry has benefited more from protection than the steel industry,” wrote Scott Lincicome, a trade policy expert at the libertarian think tank Cato Institute. Research paper 2017.

In recent years, presidents have further strengthened these protections. Mr. Trump imposed tariffs on imported steel, particularly from Japan. Mr. Biden partially canceled these levies to try to rebuild alliances. Mr. Biden also included tough “Buy America” provisions in his sweeping new laws aimed at investing in infrastructure, clean energy and other advanced manufacturing industries.

These efforts fall far short of returning the levels of domestic steel production that the United States enjoyed in the 1970s – or even in recent decades. crude steel production reaches higher levels under Presidents Bill Clinton, George W. Bush and Barack Obama than under Mr. Biden or Mr. Trump.

Employment in the industry declined steadily throughout the 1990s and mid-2000s. In 2022, there were just over 83,000 workers steel factories in the United Stateswhich is less than half the number since 1992.

Senators including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, as well as Mr. Hawley and JD Vance of Ohio, both Republicans, urged Mr. Biden to revisit the proposed sale of U.S. Steel to guard against the loss of steel production and jobs. Mr. Brown cited Nippon Steel’s failure to inform or consult with union leaders before making its bid for the company.

“Tens of thousands of Americans, including many Ohioans, depend on this industry for good-paying, middle-class jobs,” he wrote in a letter to Mr. Biden last month. “These workers deserve to work for a company that invests in its employees and not only honors their right to join a union, but respects and collaborates with its workforce.

Calls for an administrative review of the deal have largely focused on the Committee on Foreign Investment in the United States, known as CFIUS and headed by Janet L. Yellen, the Treasury Secretary. The committee reviews possible sales of U.S. companies to foreign companies for possible national security threats and then makes recommendations to the president, who can suspend or block a deal.

Shortly before Christmas, Mr. Biden appeared to grant the request for review, although without saying that he would block it.

Lael Brainard, who chairs the White House National Economic Council, said in a press release that Mr. Biden favors foreign investment in American manufacturing, but “believes that the purchase of this iconic American company by a foreign entity – even that of a close ally” – appears to merit further scrutiny in terms of its potential impact on national security and supply chain reliability.

The administration, Ms. Brainard said, “will be prepared to carefully consider the findings of such an investigation and act as necessary.”

Steelworkers applauded the decision. David McCall, president of United Steelworkers International, said in a statement that Mr. Biden “once again demonstrated the president’s unwavering commitment to domestic workers and industries.”

Independent experts say it would be well within historical standards for the committee to evaluate the sale. That will likely include a detailed economic analysis of whether the deal could lead to a decrease in U.S. steel production capacity, said Emily Kilcrease, a CFIUS expert and senior fellow at the Center for a New American Security.

But Ms Kilcrease said that, based on the committee’s past decisions, she expected the review to stop well short of a recommendation to end the sale. Instead, she added, CFIUS could require an agreement from Nippon Steel to maintain certain levels of U.S. employment or production as a condition of consummating the sale.

“I would be shocked if this deal was blocked,” she said.

Mr. Hawley said the election was ultimately Mr. Biden’s — and a test of his commitment to the industry.

“If the administration absolutely wants to block the sale, it has grounds and legal authority to do so,” he said. “So it’s just a question of do they want it?” And will they have the courage to do it?