All Dissemblers: US Steel and American Distrust

On December 18, US Steel announced it had concluded an acquisition deal with Nippon Steel. The storied steelmaker agreed to a $14.1 billion USD buyout by the Japanese company.

American conservatives and liberals alike have reacted with outrage and indignity. Ohio Republican Senator JD Vance decried the sale of "a critical piece of America's defense industrial base" to "foreigners for cash." Pennsylvania Democrat Senator John Fetterman, looking much like a steelworker, similarly criticized the deal in a December 19 video. Fetterman declared it "outrageous that US Steel has agreed to sell themselves to a foreign company."

In an official statement, the United Steelworkers (USW) union condemned the sale to a "foreign-owned company." Additionally, USW called on "government regulators to carefully scrutinize this acquisition and determine if the proposed transaction serves the national security interests of the United States."

No Anti-Espionage Law

Indeed, from a security standpoint, the union's concerns are valid, as Japan still has no anti-espionage law. Economic security analyst Koji Hirai elucidated the inadequacies of Japan's intellectual property security measures in a 2022 interview published in the Japanese opinion magazine WiLL. Japan's lack of a security clearance system has hampered joint research projects with other nations.

US companies have terminated contracts with Japanese corporations for the same reason. Furthermore, Japan does not have a non-disclosure system for patents, which are publicized after a year and a half. As Hirai explains, this has allowed North Korea to use patented Japanese laser technology in its weapons in the past.

However, thanks to the efforts of Minister of State for Economic Security Sanae Takaichi, the government is currently preparing anti-espionage legislation. The proposed bill would introduce a strict security clearance system for classified information and a non-disclosure system for patents.

Falling Output, Expanding Benefits

National security was not the USW's only point of concern, however. The union also stipulated that Nippon Steel has "significant obligations to fund pension and retiree insurance benefits [for US Steelworkers]." These social security benefits, it boasted, are the "most extensive in the domestic steel industry."

In 2022, US Steel agreed to a 5% annual wage increase for four years. This represented a compounded increase of 21.55%. The deal also included $4,000 USD in bonuses, additional holidays, increased pensions, and improved healthcare benefits.

As CNN Business observed, however, "US Steel has fallen far below other American steel companies in steel output and stock market value." Granting such lavish benefit packages during a production decline would seem economically counterintuitive.

In his essay "Killing the Goose," renowned economist Thomas Sowell demonstrated how labor unions can negatively impact workers. He described how "legendary labor leader John L Lewis called so many strikes in the coal mines that many people switched to using oil instead because they couldn't depend on coal deliveries." Similarly, the USW might consider reflecting on the role its demands may have played in this current situation.

*The signboard sits in front of the building that houses Nippon Steel headquarters in Tokyo's Chiyoda district. (©Kyodo)*

Outdated Attitudes and Hypocrisy

While security issues warrant concern, the rhetoric with which US media and politicians have depicted the acquisition is primitive. Responses from American citizens have also been disappointing.

On December 19, Breitbart News posted about the deal on its official Instagram account. The post was titled "US Steel, Which Helped America's 'Arsenal of Democracy' Defeat Japan in WWII, Sold to Japanese Company."

In the comments section, users raged that there was "No American pride left!" Another user commented, "A foolish country sells its best asset and its gates to its enemies." Among the salvo of complaints, one user commented, "Japan is not an enemy. It's our biggest Asian ally." However, the reply he received was, "We can't trust anyone. Today they are our friends, but tomorrow they are not."

US President Joe Biden has publicly stated that Nippon Steel's planned acquisition requires "serious scrutiny." Such language would be understandable if, for example, a Chinese enterprise had bought out the company. Under its Torch Program, China targets hi-tech commercial industries for intellectual property theft. But did Chinese conglomerate Wanxiang Group's acquisition of A123 Systems in 2013 receive "serious scrutiny"?

A123 Systems was originally an American company that produced batteries for the US Air Force. With this acquisition, the US sold its advanced military battery technology to Beijing. Although he was vice president then, Biden failed to express any such alarm. There are several theories as to why, but that is beyond the scope of this article.

*US President Joe Biden at the White House. December 12, 2023. (©Reuters by Leah Millis)*

The Fickle Hand of Friendship

Japan has been a loyal US ally for seven decades, both militarily and economically. Yet American public opinion regarding this deal begs an unsettling question: Does the US truly value its friendship with Japan? Or is it simply one of convenience?

Investment strategist Ryoji Musha's recent book Yasui Nippon ga Nihon wo Daifukkatsu Saseru! (How the Depreciating Yen Will Revive Japan) touches on the history of US-Japanese economic and military relations.

"With the outbreak of the Korean War, the US formed a military alliance with Japan to contain the spread of communism," he explains. Japan constituted an integral supply line for the US Army. Throughout the Cold War, Japan helped safeguard American interests in Asia against the Soviet Union. In exchange, the US supported Japan in its industrial development.

However, with the waning of Soviet influence in the late 80s, Washington grew increasingly envious of Japan's economic and industrial growth. Musha notes this was "perfectly symbolized by the Japan-US Semiconductor Agreement" in 1986. At the time, Japan held an almost 50% share of the global semiconductor market. However, the US accused Japan of unfair competition and demanded it limit its semiconductor exports.

"Although America had a 20% share of the semiconductor market, its Japanese market share was only two percent," Musha explains. Quality issues and the cost of American semiconductors meant that Japan's demand for domestically produced semiconductors was higher. Under pressure from Washington, Tokyo acquiesced and agreed to grant the US a 20% share of its semiconductor market. Japan's semiconductor industry rapidly stagnated. Its shares dropped from 50% in 1989, 40% in 1994, and 30% in 1998, to just 10% in 2015.

A Question of Trust

Ironically, as the US pivots away from China over its expansionism and human rights violations, it is once more turning to Japan. Anticipating an artificial intelligence (AI) war with China, the US Senate passed the United States Innovation and Competition Act in 2021. Of the $200 billion USD appropriated to strengthen US technology and research, $54 billion USD was earmarked for semiconductor research and development.

China, South Korea, and Taiwan can manufacture semiconductors. Japan, however, controls 60% of the global market for semiconductor raw materials. And the US is suffering from a shortage of microchips for cars. In May 2023, the US-Japan University Partnership for Workforce Advancement and Research & Development in Semiconductors (UPWARDS) for the Future was established. Over the next five years, the program aims to expand cooperation between higher education and the semiconductor industries in both nations.

But what guarantee does Japan have that the US will not desiccate its industry again once it has served American utility? Will Washington ever truly recognize Japan as an equal and understand that it is not plotting a banzai attack on its economy?

Amid raging wars and developing hybrid warfare, trust and sincerity may seem like values for the hopelessly naive. Nevertheless, Japan has held fast to these principles in its relationship with the US since the end of the war. It is time America reciprocates this respect. If America cannot trust Japan, then who can it trust?

Author: Daniel Manning