TOKYO, Sept. 16 (Xinhua) -- Top executives from the Japanese steel giant Nippon Steel Corporation have left for the United States to meet with senior U.S. officials in an attempt to salvage their acquisition of United States Steel Corporation, according to local media reports, after sources said that U.S. President Joe Biden was set to stymie the deal citing "national security" concerns.
Nippon Steel announced last December its intention to purchase U.S. Steel for 2 trillion yen (about 14.9 billion U.S. dollars), but the acquisition plan has faced strong opposition from the United Steelworkers (USW) union and members of both the Democratic and Republican parties. Presidential candidates from both sides, Kamala Harris and Donald Trump, have also voiced their disapproval.
Analysts suggest that the political climate ahead of the U.S. presidential election has motivated the government's interference, driven by the need to appeal to voters, highlighting how market rules and international alliances can be sidelined in favor of "election priorities" in the dictionary of U.S. politicians.
ACQUISITION PLAN STALLED
Nippon Steel's acquisition of U.S. Steel was scheduled for completion by September this year, according to the company's announcement last December. In April, U.S. Steel convened a special shareholder meeting where the deal was approved, leaving the U.S. government's review as the key hurdle.
On Wednesday, Takahiro Mori, vice chairman and executive vice president of Nippon Steel, met with representatives of the Committee on Foreign Investment in the United States (CFIUS) in Washington D.C. During the meeting, U.S. officials expressed concerns about the deal due to national security. Reports indicated that Biden may soon order to halt the transaction.
Gary Clyde Hufbauer, a nonresident senior fellow at the Peterson Institute for International Economics, told Xinhua that Nippon Steel has superior technology to U.S. Steel, so a takeover would improve the long-run outlook and bring more employment. "All that will be lost with rejection of the Nippon offer," he said.
U.S. Steel CEO David Burritt warned in early September that if the deal fails, the company may close its headquarters and factories in Pittsburgh, Pennsylvania, putting thousands of jobs at risk and possibly forcing the company to relocate its headquarters outside the country.
However, the USW opposed the deal, citing a lack of prior consultation with the union that breached the cooperative agreement between the USW and the company. This raised concerns about whether the new management would uphold existing labor contracts, including pensions and health benefits for retirees.
USW President David McCall stressed that Pittsburgh's proud steelmaking history, spanning over 200 years, is at stake if the steel mill suddenly becomes Japanese-owned. "It's not good for our communities. It's not good for America ... The steel we find in our cars, buildings and even food cans is a matter of national security," he said.
"POLITICAL ISSUE"
Pennsylvania, where U.S. Steel is headquartered, is a critical swing state in the upcoming U.S. presidential election, and union members' votes are highly sought after by both candidates.
Analysts suggest that the Biden administration, under pressure from the USW, is blocking the acquisition to counter Trump ahead of the election, leaving the deal's future uncertain.
In March, Biden issued a statement opposing the merger, and Trump has also vowed to block the deal if re-elected. During an Aug. 19 speech in Pennsylvania, Trump reiterated his stance by saying he would "stop Japan from buying U.S. Steel" and "reclaim the manufacturing legacy." At a campaign event in Pittsburgh on Sept. 2, Harris echoed these sentiments, stating that U.S. Steel should remain "American-owned and American-operated."
The Democrats' opposition stems largely from Trump's stance, said Watanabe Tsuneo, a senior research fellow at the Sasakawa Peace Foundation, a Japanese policy research institute, adding that with the U.S. presidential election approaching, the Democrats find themselves forced to take similar positions to compete for union support.
Harris and other Democrats see winning the union vote as key to defeating Trump, especially in this critical phase of the election, according to a recent report by Japanese news agency Kyodo.
Hufbauer noted that bipartisan opposition indicates that both parties believe that preserving American ownership of an iconic firm gains a few votes in swing states. "The decision makes no sense economically, but it might make a difference in a close election," he said.
An article published by the Japanese newspaper Nihon Keizai Shimbun noted that the acquisition has now become a "political issue" in the United States, with little progress expected before the November presidential election.
MISUSING "NATIONAL SECURITY"
Analysts argued that the obstruction of the buyout illustrates how both U.S. political parties prioritize electoral gains. The United States has a long history of invoking "national security" to suppress foreign entities, even its allies -- from pressuring Japan into signing the Plaza Accord in the 1980s to launching multiple Section 301 probes that hurt Japan's semiconductor industry, or conducting "judicial investigations" to force the French company Alstom to sell its power business to General Electric.
The Japan Business Federation, or Keidanren, in partnership with some U.S. business groups, sent a joint letter to U.S. Treasury Secretary Janet Yellen, who chairs CFIUS, expressing concern about political pressure in the review process.
The letter warned that such scrutiny puts the U.S. economy and workers at risk and that CFIUS should never become a tool for political posturing and should not morph into industrial policy masquerading as national security.
Some candidates participating in Japan's ruling Liberal Democratic Party leadership race have also weighed in on the matter. Shigeru Ishiba, a former Japanese defense minister and a frontrunner in the race, expressed concern over U.S. efforts to block the acquisition, noting that it could erode trust between Japan and the United States.
Another hopeful, Digital Minister Taro Kono, said that he "never imagined" the acquisition would spark national security concerns, arguing that such a deal should focus on enhancing productivity and efficiency, without government interference.
Biden has sought to elevate economic relationships with U.S. allies, but critics argue that his opposition to a merger with a Japanese firm raises questions about Washington's commitment to its allies and its openness to foreign investment, noted an article on the website of the Council on Foreign Relations, a U.S. thinktank. ■
