President Biden's decision to block Nippon Steel's proposed acquisition of U.S. Steel for $14 billion was based on national security concerns – a rationale that has sparked pushback
Biden announced the decision on Friday after the Committee on Foreign Investment in the U.S. (CFIUS) deferred the decision to the president after it failed to reach a consensus in its review. The president's order cited "credible evidence" that Nippon Steel "might take action that threatens to impair the national security of the United States" – though the order didn't detail those concerns.
In an accompanying statement, Biden explained that a "strong domestically owned and operated steel industry represents an essential national security priority" and added he "will never hesitate to act to protect the security of this nation and its infrastructure as well as the resilience of its supply chains."
U.S. Steel and Nippon Steel released a statement condemning the decision to block the deal as "unlawful" and said the commitments made by Nippon Steel would've strengthened national security. The companies noted that they offered to prohibit the transfer of any production and jobs outside the U.S., as well as to give CFIUS the ability to veto any production decreases at U.S. Steel facilities in the next 10 years to assuage concerns about steel supplies and their impact on national security.
PRESIDENT BIDEN TO BLOCK SALE OF US STEEL TO NIPPON STEEL
However, they said CFIUS "did not give due consideration to a single mitigation proposal offered… as evidenced by the absence of any written feedback to the four robust national security agreements that the Parties proactively offered over 100 days." The companies added that the "CFIUS process was deeply corrupted by politics, and the outcome was pre-determined, without an investigation on the merits, but to satisfy the political objectives of the Biden White House."
Nippon Steel also pledged to invest at least $2.7 billion to modernize U.S. Steel's Mon Valley Works near Pittsburgh and the Gary Works in Indiana to better enable those steel mills to compete with international rivals. U.S. Steel CEO David Burritt previously told The Wall Street Journal that the company wouldn't be able to do that if the deal falls through because, "I don't have the money."
The two companies said in Friday's statement that they continue to believe the deal "is the best way to ensure that U.S. Steel, and particularly its USW-represented facilities, will be able to compete and thrive well into the future." U.S. Steel and Nippon Steel added they will "take all appropriate action to protect our legal rights and secure that future."
MIKE POMPEO DEFENDS US STEEL, NIPPON STEEL DEAL, URGES TRUMP TO DO THE SAME
The White House's decision drew praise from the United Steelworkers (USW) union. USW International President David McCall said that Nippon is a "serial trade cheater that for decades worked to undermine our domestic industry by dumping its products into our market."
He added that the purchase would've allowed Nippon to "destabilize our trade system from within" while undercutting "our ability to meet our own national security and critical infrastructure needs."
"It's clear from U.S. Steel's recent financial performance that it can easily remain a strong and resilient company. We now call on U.S. Steel's board of directors to take the necessary steps to allow it to further flourish and remain profitable," McCall said.
Scott Lincicome, VP of general economics and the Cato Institute's Stiefel Trade Policy Center, noted in a blog post that the deal was backed by an independent arbitration panel chosen by the U.S. Steel and the USW, as well as 98% of U.S. Steel shareholders when the deal was put to a vote.
Lincicome noted that the Treasury, State and Defense Departments concluded the deal posed no security risks, and that many independent experts in national security and foreign policy viewed the deal as a way to bolster national security and ties with a close ally in Japan.
He added that while the companies may ultimately prevail in a legal challenge against Biden's decision to allow the deal to proceed, the president's action "risks damaging the U.S. investment review process; U.S.-Japan relations; the United States' position as a welcoming place for foreign investment; nations' general rule against using 'national security' as a guise for political favoritism and economic protectionism; and the U.S. economy itself. The courts, unfortunately, won't be able to reverse any of that."
TRUMP SAYS HE WILL BLOCK NIPPON STEEL TAKEOVER OF US STEEL: 'BUYER BEWARE'
Alexis Early, a partner at Jenner & Block whose practice includes a focus on CFIUS matters, said in a statement that the "decision looks political, tied to economic security, and not underpinned by serious unresolvable national security concerns."
She also noted that the decision could weaken efforts to strengthen ties with a close ally that is needed to help counter China's rising influence. Japan is party to a mutual defense treaty with the U.S., and has been a crucial partner on economic and defense initiatives.
"Low-risk foreign investors will think twice before voluntarily putting themselves through such an arbitrary and unaccountable process," she added. "As the daughter of a Pennsylvania steel worker and a CFIUS lawyer, I've watched this deal very closely. CFIUS deviated from its core national security responsibility by focusing on a subset of economic critiques."
GET FOX BUSINESS ON THE GO BY CLICKING HERE
Jason Furman, an economic policy professor at Harvard who chaired the Council of Economic Advisers during much of President Obama's second term, also took issue with the Biden administration's decision to block the deal.
"President Biden claiming Japan's investment in an American steel company is a threat to national security is a pathetic and craven cave to special interests that will make America less prosperous and safe," Furman wrote in a post on X. "I'm sorry to see him betraying our allies while abusing the law."
