Common Conviction

As pointed out by a prominent Pittsburgh lawyer, “two presidential candidates, a handful of Pennsylvania politicians, and several union leaders were quick to publicly condemn” US Steel’s acceptance of an acquisition offer from Nippon Steel.  A major reason cited in the objections was national security.  Blocking the deal on that basis would be a terrible mistake.

As background, Nippon Steel’s offer is more lucrative than the competing bid, Nippon Steel has pledged to honor US Steel’s labor agreements, and headquarters will even remain in Pittsburgh.  The only possible issue aside from the national security claim would be a mistrust of Nippon Steel to work with labor.  But Nippon Steel has operated other firms in the US with no notoriety over labor issues and steel is a global industry, so the labor pressures of the global market will be the same under any ownership.  And unions’ mistrust and preferences do not add up to a national security issue.

Many protagonists in industrial issues make rhetorical use of “national security” to refer to prospective job losses, investment decisions, and other effects that would purportedly be worse if foreigners buy a US company.  Those issues are actually business issues, unless the foreign owners might reasonably be viewed as hostile to America.  If the Baowu Steel, the Chinese firm, were taking over, the nature of Chinese Communist rule would raise a plausible national security fear.  Even if a very wealthy person based in, say, Pakistan were the buyer, the nature of politics in unstable settings would raise a reasonable concern.  

But Japan is as firmly democratic a nation as there is, it is a long standing ally that is deepening our military and geopolitical ties, and, though their corporations operate by different cultural habits, they are capitalists.  

There could be another national security concern for a business, if key production facilities could be vulnerable to hostile attack or isolation from us.  Worries about Taiwanese chip factories’ exposure to Chinese action, and chips’ role in defense and crucial infrastructure, fall under this concern.  But the US Steel acquisition involves Nippon Steel’s money coming here – all the assets are in US territory and jurisdiction.  

Beyond all the arguments about the deal, blocking the US Steel acquisition on national security grounds would paint the US as hypocritical.  If we act on this argument against a democratic ally, we clearly put vested interests and partisan competition ahead of the values we claim as American.  If democracy, due process of law and public interest of regulation are discarded for our vested interests, then our professions for freedom and rights and rule of law look like a sham.  The Chinese Communists, Putin’s Russia, and Iran’s mullahs will gain credibility in their claims, that we simply seek power and wealth, just like them.  America’s objective national characteristic is our founding on a principle, of rights and of government existing to secure them.  If our conduct belies that principle, we put the base of our national existence in question.

This problem is not limited to the US Steel deal.  We are managing our economy for political reasons, which, as the WSJ’s Greg Ip says, looks a lot like the Chinese.  Some of the issues are genuinely perplexing – we can reasonably worry that TikTok might be used to glean data and taint American discourse for the Chinese Communist Party’s ends, even as the platform supports a number of American entrepreneurs.  But we need, at a minimum, to distinguish those national security concerns from the claims voiced in the steel deal.  The real national security issue with US Steel is about our commitment to a like-minded ally and our own values.