Except, apparently, these are not the goals after all.
Enticed by the credits, the subsidies and a booming market for steel ring-fenced by Buy American provisions, Nippon Steel offered some $14 billion to buy Pennsylvania-based U.S. Steel, a former titan of the industry now come into leaner days. The Japanese firm promised new investment and new technology, which could help create a stronger and more competitive domestic steel industry. It committed to abide by U.S. Steel’s collective bargaining agreement with United Steelworkers and to not shift jobs abroad.
Mr. Biden should argue that the Nippon Steel deal would be a success in his drive to preserve American manufacturing. Instead, he’s opposing it. Last week, Mr. Biden argued that “it is vital” for U.S. Steel “to remain an American steel company that is domestically owned and operated.” In practice, this would mean snubbing the Japanese and presumably accepting a lower bid from U.S. steelmaker Cleveland-Cliffs, which the United Steelworkers likes better.
Yes, political observers might note that the presidential election is less than eight months away, that Mr. Biden needs to win Pennsylvania, and that he seeks to please organized labor. (Former president Donald Trump beat him to declare opposition to Nippon Steel’s bid.) But Mr. Biden’s apparent preference for a Cleveland-Cliffs takeover contradicts the policy goals he claims to have.
The Alliance for Automotive Innovation, a lobby group for U.S. auto manufacturers, warned members of Congress that the combined company would control all of the nation’s blast furnace production and between 65 and 90 percent of the steel that goes into cars and light trucks. “In a combined company, 100 percent of the domestic e-steel needed for electrical motors and EV production will be concentrated in a single company,” it noted. Perhaps the Federal Trade Commission can advise the White House on what this near-monopoly power would do to its effort to drastically increase the share of EVs on the road.
The president might justify his opposition to the Nippon Steel bid on national security grounds. Per statute, the Committee on Foreign Investment in the United States is looking into that. But Washington has no tighter ally in East Asia than Japan. National security considerations counsel forging closer ties to counter China — certainly not insulting the Japanese.
The entanglement of policy and political motivations, each at odds with the other, visible in Mr. Biden’s Nippon Steel positioning reflects the broader weakness in Bidenomics, a grab bag of objectives and policies the administration hopes to sell as a grand new economic strategy. It wants to decarbonize the economy, boost manufacturing and employment, and please unions. It hopes to “friendshore,” to curb China’s access to advanced tech, and to somehow stay on good terms with America’s friends as new threats emerge around the world.
These things do not mix well. And though some elements of Mr. Biden’s policies are extremely important, such as his green energy plans, they would be much more effective at, say, cutting carbon emissions if the law weren’t also written to coddle a select group of politically favored domestic companies and unions.
It’s not just that Buy America policies are expensive — they cost about $250,000 per job created in government procurement projects, according to Gary Clyde Hufbauer and Euijin Jung of the Peterson Institute for International Economics. National champions protected by government fences usually get sloppy and fail to maintain a cutting edge. Friendshoring — shrinking global production networks to include only allies — can lead to more unstable supply chains, vulnerable to political realignments. And it can be difficult to sustain in an environment in which Washington seeks to wall off the U.S. economy even from its partners: A European analysis of the domestic content requirements in the Inflation Reduction Act was titled “unfriendly friends.”
The Nippon Steel deal could ultimately get approved. The United Steelworkers, which has stood in vociferous opposition, probably understands that it will be treated less kindly on the other side of the election. But the lesson of this episode should resonate with those wondering whether Washington’s bipartisan turn away from economic liberalism, in favor of state-directed investment strategies and trade protectionism, will ultimately help the economy or effectively advance other goals. Trying to do too many things all at once often means doing few of them well.
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