A Japanese company’s bid for American steel puts Biden’s industrial policy to the test

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

But last month the storied but diminished company announced plans to be acquired by a Japanese rival. That development has left Mr. Biden in an awkward situation as he tries to balance efforts to revive the country’s industrial sector with his efforts to rebuild international alliances.

The Biden administration has expressed some unease about the deal and is reviewing the proposed $14.1 billion takeover bid by Japan’s Nippon Steel. The company offers a big premium for US Steel, which has struggled to compete against a tidal wave of cheap foreign metal and continues to do so consider takeover bids for several months.

The proposal has quickly become a high-profile example of the difficult political choices Biden faces in his zeal to revive American industry, one that could test the extent to which he is willing to bend presidential power in pursuit of which is perhaps its main purpose. economic goal: to create and retain good-paying union manufacturing jobs in the United States.

Mr. Biden is under pressure from the United Steelworkers union and populist senators from both parties, including Democrats defending crucial swing seats in Ohio and Pennsylvania this fall, to rescind the sale on national security grounds. The senators argue that domestic steel production is critical to U.S. manufacturing and supply chains. They have warned that a foreign owner is more likely to move US Steel jobs and production abroad.

“This 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, my God, we’ve got to keep steel production going in this country, and especially in a company like this where you have thousands of workers in good union jobs.”

US Steel executives say the deal would benefit workers and give the merged companies “world-leading capabilities” in steelmaking. They announced last month that Nippon Steel had agreed to keep the company’s headquarters in Pittsburgh and honor its four-year anniversary collective agreement that the steelworkers union ratified in December 2022.

Other supporters of the takeover bid say blocking the sale risks angering a key U.S. ally. Mr. Biden has promoted Japanese cooperation on a wide range of issues, including efforts to counter Chinese production in clean energy and other emerging technologies, and welcomed Japanese investments in new U.S. manufacturing facilities, including for advanced batteries.

Wilbur Ross, former steel company executive and Secretary of Commerce under President Donald J. Trump, wrote last week in The Wall Street Journal that there is “nothing in the deal that the US should defend itself against. Attacks by the Washington Pol only create unnecessary geopolitical tensions, and that, and not the takeover itself, could endanger U.S. national security.”

Adding to the peer pressure on Mr. Biden, it is unclear what would happen to 123-year-old US Steel if the administration scraps the deal and whether it would actually guarantee greater job security for the company’s nearly 15,000 North American employees company .

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

“No American industry has benefited more from protections than the steel industry,” wrote Scott Lincicome, a trade policy expert at the libertarian think tank Cato Institute, in a 2017 research paper.

In recent years, presidents have further increased these protections. Mr. Trump imposed tariffs on imported steel, including from Japan. Mr. Biden has partially rolled back those tariffs in an effort to rebuild alliances. Mr. Biden also included strict Buy America provisions in sweeping new laws to invest in infrastructure, clean energy and other advanced manufacturing.

These efforts have not come close to returning the levels of domestic steel production that the United States enjoyed in the 1970s—or even in recent decades. Production of crude steel reaches higher levels under Presidents Bill Clinton, George W. Bush and Barack Obama than under Mr. Biden or Mr. Trump.

Employment in the sector declined steadily through the 1990s and mid-2000s. In 2022 there were just over 83,000 employees iron and steel mills in the United Stateswhich was less than half the number in 1992.

Senators including Sherrod Brown of Ohio and Bob Casey of Pennsylvania, both Democrats, and Mr. Hawley and J.D. Vance of Ohio, both Republicans, urged Mr. Biden to review the proposed sale of U.S. Steel to guard against lost steel production and jobs. Mr. Brown cited Nippon Steel’s failure to notify or consult union leaders before bidding for the company.

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

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 examines potential sales by U.S. companies to foreign companies for possible threats to national security and then makes recommendations to the president, who can suspend or block a deal.

Shortly before Christmas, Mr. Biden appeared to grant the review request, while stopping short of saying he would block it.

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

The government, Ms. Brainard said, “will be prepared to look carefully at the findings of any such investigation and take action if necessary.”

Steelworkers applauded the move. 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 norms if the commission were to review the sale. That will likely include a detailed economic analysis of whether the deal could lead to reduced steelmaking capacity in the United States, 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 previous decisions, she expected the review to end well before there was a recommendation to halt sales. Instead, she said, CFIUS could require an agreement from Nippon Steel to maintain certain levels of employment or production in the U.S. as a condition for the sale to proceed.

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

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

“If the government wants to block the sale, they absolutely have reason to do so and the legal authority,” he said. “So it’s just a matter of: Do they want that? And will they have the guts to do it?”