U.S. – Japan Steel Alliance Helps National Security of Both

Attention-grabbing media headlines such as “After U.S. Steel announces sale, reactions range from outrage to concern,” and “U.S. Steel-Nippon deal merits 'serious scrutiny,' says Biden aide,” fuel Americans' worry. They fear another iconic American company is being sold to a foreign buyer, in this case Japan. 

Lawmakers from Pennsylvania and Ohio have requested Treasury Secretary Janet Yellen block the proposed sale of the Pittsburgh-based company. They argue that the country’s core industries should not be dependent upon foreign actors. 

But is this angst justified? After carefully exploring the issue, I think not.  

U.S. Steel peaked in the 1970s when Terry Bradshaw was winning Super Bowls with the Pittsburgh Steelers. And at that time, a half century ago, Americans had fresh memories and solid reasons for being wary of Japan. But this isn’t the ‘70s, ‘80s or even the ‘90s. And while it’s true that U.S. Steel was the first billion-dollar American corporation and once dominant in global steel, those days are long gone. Today it doesn't even crack the Top 20 steel companies worldwide. 

China now dominates steel global production, controlling 27 steel producers out of the top 50 and 6 of the top 10. If the U.S. and our allies don't work together, Beijing will soon run the table on the steel market. 

The WSJ Editorial board suggests that teeing up a Committee on Foreign Investment in the United States (CFIUS) review of the U.S. Steel purchase is to treat Japan and China alike. In fact it rightly notes, "Japan is arguably America's most important ally as a bulwark against China." 

Japan is one of the strongest U.S. allies, both in military might and economic clout. I witnessed the unmatched professionalism of their Self-Defense Forces first-hand during my two U.S. Navy tours of duty in Japan. I also saw it later as the senior spokesman for the United States Pacific Fleet. 

The U.S. has forward deployed the Seventh Fleet, where I also served as the spokesman, for nearly 80 years, requiring critical cooperation with host-nation Japan in defense-related matters. Having the premier naval battle force within hours or days of being able to respond to a threat is critical when it can take weeks to get forces from Hawaii or the West Coast. 

In testimony before the U.S. International Trade Commission on Jan. 4, Cleveland-Cliffs Chief Executive Lourenco Goncalves criticized Nippon Steel and U.S. Steel, claiming that the latter is “ignoring” the consequences of its sale on “critical products to national security.” With all due respect, Goncalves is missing the boat.  

"It is pretty clear that Japan does not pose any national security risk to the United States," says Clark Packard, a research fellow at the Cato Institute. "It's not like Nippon Steel is a state-owned steel company in China. It's a privately owned company in Japan and the U.S. should welcome all kinds of investment from Japan." 

Former Treasury Secretary Lawrence Summers, who served in the Obama Administration, said there’s no national-security justification for questioning the proposed takeover of U.S. Steel by Japan’s Nippon Steel Corp. 

“There is no remotely plausible national-security rationale for questioning the Nippon-US Steel transaction,” Summers said on Bloomberg Television’s “Wall Street Week” with David Westin. “Japan is a staunch ally.” 

Moreover, both U.S. Steel and Cleveland-Cliffs are major suppliers to the American automotive industry. The consolidation of major American industries into fewer and fewer large firms has had negative consequences for market competition, consumers, and workers. This is described here, here, here and here. 

Regulators must maintain competition in the steel industry. This is necessary to keep the economy strong and healthy. They must prevent further consolidation that would raise prices for American consumers. 

Having one U.S. firm dominate so much of an industry that plays a vital role in our domestic supply chains and national defense is bad for our economy and national security. Instead, lawmakers and regulators should approve the Nippon Steel acquisition of U.S. Steel as approved by each company’s board of directors. 

Times have changed. The U.S. and our allies must keep pace with current realities for collective national security. 

Scott Gureck, a retired U.S. Navy captain, served as an Executive Vice President at the U.S. Naval Institute in Annapolis, Md and president, Naval Academy Class of 1986. Military assignments include spokesman for Commander, U.S. Pacific Fleet in Pearl Harbor, U.S. Seventh Fleet in Japan, and USS Independence (CV 62) during the China-Taiwan crisis of 1996. The opinions expressed here are his own.