Experts Say Nippon Steel Deal Has No Security Risk

President Joe Biden has indicated his intent to block Nippon Steel from acquiring US Steel. However, experts caution that this move could weaken the United States' competition with China, considered its greatest threat.

They argue that blocking the acquisition would also undermine efforts to strengthen US-Japan relations, crucial to their strategy for dealing with China.

These experts also dispute the Biden administration's claims regarding national security concerns.

National Security Risk?

The United Steelworkers (USW) union opposes the acquisition. Its position is backed by Biden, who calls himself "the most pro-union President [...] in American history."

He is likely to await advice from the Committee on Foreign Investment in the United States (CFIUS) before taking action to block the deal. CFIUS has reportedly cited "national security concerns," claiming that the acquisition could threaten steel supplies vital to key US industries.

*US President Joe Biden. (©Getty via Kyodo)*

However, Kenneth Weinstein, the Japan Chair of the Hudson Institute, disagrees. He stated, "There is no security risk," arguing that Nippon Steel's investment would make US Steel a stronger economic player. This would enable the US to compete more effectively with China.

Decline of the US Steel Industry

The US steel industry has declined, facing intense price competition from countries like China. China now controls over 50% of global steel production, while the US holds just 4%.

William Chou, Deputy Director at the Hudson Institute's Japan Chair, acknowledged that "steel is a crucial national resource." However, he noted that the US Department of Defense uses only 3% of domestically produced steel. He further argued that claims of security concerns are politically driven.

Chou emphasized that "China deliberately continues overproduction to dominate the international market and create dependence on its steel."

He added, "Under Xi Jinping, China refuses to adhere to a rules-based order. This shared understanding between Japan and the US makes close cooperation essential."

Boosting Competitiveness

Nippon Steel plans to acquire US Steel for $14.9 billion USD and boost its domestic production capacity and supply chains through advanced technology. An additional $2.7 billion will be invested in upgrading existing production facilities.

Chou highlighted that Japanese investments in the US, including those by Nippon Steel, align with the "achievements of the US-Japan partnership over the past decade." The partnership has strengthened in response to the growing challenge from China.

Former Republican Congressman Charlie Dent wrote in The Wall Street Journal: "We share deep military, economic, and cultural ties with Japan, whose companies have a proven history of responsible investment in the US."

He further called for a reconsideration of the national security concerns, arguing that the reasoning "reflects a dated mindset that ignores the strategic benefits of partnership with a trusted ally like Japan."

President Biden is expected to make a final decision on the acquisition after the presidential election. However, if he decides to block the deal before his term ends, it could potentially tarnish his diplomatic legacy.

(Read the article in Japanese.)

Author: Hiroo Watanabe, Washington Bureau Chief, The Sankei Shimbun