US steels itself to be more protectionist

If there is anyone out there who is still doubtful about which country poses the biggest threat to economic globalization by chipping away at the free market, the proposed merger between Japan’s Nippon Steel and US Steel should serve to settle the issue.

Nippon Steel announced in December that it planned to buy the Pittsburgh-based steel producer for $14.1 billion in a deal that many in the business community believe would benefit union workers and the US steel industry. Moreover, Nippon Steel, the world’s fourth-largest steelmaker, has even tried to gild the lily for Washington by describing it as a useful means to counter the leading role that China plays in steelmaking globally.

“Nippon Steel will advance American priorities by driving greater quality and competitiveness for customers in the critical industries that rely on American steel while strengthening American supply chains and economic defenses against China,” it said in a statement. Akira Amari, a senior Japanese ruling party lawmaker, called the proposed deal “a symbol of Japan-US cooperation as allies ... to confront China’s rising technological capability”.

To increase the chance of securing the transaction, the Japanese steelmaker, which already employs about 4,000 US workers, has also pledged to move its US headquarters to Pittsburgh. In addition, Nippon Steel said it is engaging with the United Steelworkers labor union which opposes the deal, and has offered a number of specific commitments on job security, investments and other matters.

Yet despite all these gestures that Nippon Steel has made, as well as the fact that it is shelling out around twice what a US bidder is ready to pay, politicians in Washington, from both the Democratic and Republican camps who are embracing an increasingly strident nationalist and protectionist economic vision, have joined with the USW to oppose the proposed merger.

Ironically, they have cited Nippon Steel’s exposure to China as reasons for concern, despite the Japanese steelmaker saying its operations in China are very limited — representing less than 5 percent of the company’s global production capacity.

The upcoming US presidential election in November has only served to heighten the jingoism and make the proposed deal a flag-bearer for the two parties’ self-proclaimed championing of US workers as they vie for votes. A week after President Joe Biden announced on March 14 that “US Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated”, he won the endorsement of the USW.

His Republican opponent Donald Trump had already said earlier he would block the merger if he returned to the White House, calling it “a horrible thing”.

All these serve as unmistakable signs that the US is drifting away from its longheld policy of openness to foreign trade and investment, and minimal government interference in the markets. Further evidence could be found in Biden’s 2024 State of the Union address last month that was littered with protectionist promises that the government would “buy American”.

For a long time the US has painted itself as a defender of free trade and pointed an accusing finger at China for not allowing wider market access and providing a level playing field for foreign investors. Yet the Nippon Steel merger, as well as a slew of restrictive policies that have been introduced to crack down on Chinese high-tech companies such as Huawei and TikTok, belie Washington’s claim.

It talks the free market talk, but refuses to walk the walk.