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He friendshoring (the relocation of companies to allied or friendly countries), as well as the future of trade relations, is complicated. And nowhere is this clearer than in the takeover bid by US Steel that presented Nippon Steel by 14.1 billion dollarswhich, for reasons of national security, was opposed by both the president Biden as the former president Trumpas well as the vice president Kamala HarrisThe deal will be under scrutiny for another three months: last week, the Foreign Investment Committee in EU (Cfiusfor its acronym in English) made the decision to extend the review period.
The extension will give you the Cfius more time to examine the possible ramifications of the agreement, but it will also give Harris a breathing space for steel policy in Pennsylvania. There, despite opposition to the deal from unions, some workers are now worried that if it doesn’t go through, they will lose their jobs.
It is an explicit threat from the CEO of US Steel, Dave Burrittwhich promises to close three Pittsburgh-area plants that employ more than 3 thousand people if the deal is not approved. His interest is not just corporate; if it goes through, he will receive a $70 million bonus for the change of control. US Steel as Nippon They have already begun to lobby heavily against the union. United Steelworkers (USW) and the opposition of the White Housewith ads urging Pittsburgh to “keep steel jobs in the steel city.”
That puts pressure on Harriswho needs to win Pennsylvania to get to the White Housebut it also highlights an important point. While any opposition to the acquisition of Nippon is presented as a simple question of protectionism versus free trade, in reality it is about much more: financialization and hostage-taking by corporations, the history of foreign mergers and acquisitions and trade agreements with EUand the real economics of national security.
As I wrote earlier this year, it is understandable that allies like Japan feel confused when EU He says he wants to keep them closer as he tries to disassociate himself from Chinaand then opposes agreements such as that of Nipponbut it is also true that the devil is in the details, and in this case, full of problematic details.
Let’s take as an example the potential payment of 70 million dollars that would correspond to Burrittwhich led a union consultant to suggest that a man dressed as “Scrooge Pennybags” (Mr. Monopoly) from the Monopoly board game be placed on Pittsburgh street corners in protest. It is just one example of the financialization of US Steel (which has been leveraged in recent years), which is part of what led to the purchase in the first place.
Burritt has a strong financial interest in the transaction going through, but so does NipponIf the deal does not get regulatory approval, Nippon will have to pay a reverse cancellation penalty to US Steel of $565 millionIt is not surprising that both companies have reached an agreement.
Nippon The company pledged not to lay off or close plants for at least two years as a result of the acquisition, and says it will invest money in the Mon Valley operation in Pittsburgh. Still, it’s worth noting that its initial interest was only in buying the nonunion operations of US Steel in Arkansas, including cheaper-to-operate minimills.
There is also the challenge of what would happen if the investment and pension promises made today were to change in the future. There is a long history of such promises going wrong in cross-border mergers, from the refusal of Daimler to remain neutral in unionization campaigns Mercedes in EU to the current problems between the UAW and Stellantiswhich is backtracking on previous investment promises due to changing “market conditions.”
Japan agreed that if disputes arise they will be heard in U.S. courts, but workers’ advocates fear that without legal reach to the Japanese headquarters, that may not be enough. According to the USWenforcing a judgment against a foreign corporation whose assets are not in the U.S. will be too difficult and complicated to ensure your ability to collect in full and quickly. Anyone who has had to deal with a cross-border dispute knows that this is very likely to be true.
The protection of the unionized jobs is an important part of this story, but it is also about integrated steel production in EUIndustrial grade steel of the type manufactured in the Mon Valley is used for high-quality products, including military grade equipment. US Steel It has no current defense contracts, but the products made at its unionized facilities are the kind used to boost capacity in wartime. That kind of product can’t yet be made in the minimills in the South.
Why should Americans care? Because supply chains can be used as weapons, and while Japan It is an ally, it is also an economic competitor in strategic industries. Nippon helped build the steel industry in China and is accused of dumping steel in EUSome fear the deal could bring more Japanese excess capacity into the U.S. market in ways that could undermine integrated manufacturing.
Can a Japanese player that enjoys state support at home be counted on to increase domestic steel production? EU in the most strategic areas in the long term? The American subsidiary of Nippon Will the US be willing to make commercial cases that put it at odds with its parent company? Perhaps. Either way, legally enforcing compliance will be nearly impossible to achieve. In short, a deal that is presented as a mere political issue rather than a economic It is an indicator of many difficult questions. So far, there are no easy answers.
