Blocking the Nippon-US Steel deal could create a monopoly

Political courage has never been harder to find in Washington. A first One example is the opposition of President Joe Biden’s administration and presidential candidates Donald Trump and Kamala. Harris on Nippon Steel-US Steel deal – even though alternatives are US Steel go bankrupt or form a trust reminiscent of Andrew Carnegie.

The hold-up is purely political. The head of the United Steelworkers, David McCall, said its buyer of choice was Ohio-based steelmaker Cleveland-Cliffs, prompting Biden, Trump and Harris to pledge fealty to the union so their campaigns could ring in votes in Pennsylvania.

Unlike most promises we hear during election cycles, whoever wins the White House may have to put their words into practice. The Committee on Foreign Investment in the United States (CFIUS), the interagency body responsible for conducting national security reviews of foreign investments in the country, is expected to make a decision after the election on whether the proposed transaction between Nippon, Japan’s largest steelmaker, and US Steel poses a national security risk. If CFIUS finds national security concerns, it could suspend authorization of the transaction until steps are taken by the parties to mitigate the risks. If risk mitigation is not possible, CFIUS submits the case to the president, who has 15 days to approve or deny the transaction, effectively forcing the matter into Biden’s lame duck or, depending on who wins the deal. presidential election, to Trump or to Harris.

Since everyone is against the deal, they will have a hard time approving the transaction, even if they are shown the facts that everyone can see after a few Google searches.

Blocking the deal won’t stop the Mon Valley plants in Pennsylvania and Gary Works in Indiana from aging or US Steel from seeking another buyer. If Nippon Steel were excluded, the only other buyer in play would be Cleveland-Cliffs, creating a monopoly in which only one company controls 95% of American iron ore60% of automotive grade steel and all production of silicon-infused electrical steel, crucial for electric vehicles. To put it plainly, it would create the type of trust that our antitrust laws were created to combat.

Such a monopoly would be seriously detrimental to the country and our industrial capacity. In a letter from October 2023 Submitted to congressional antitrust committees, the U.S. auto industry expressed concerns that such a concentration of power over the materials needed for automobile production would reduce the profitability of their companies. Indeed, the more dominant a company becomes in the market, the more it will base its prices on the level at which buyers have the ability to pay – not on supply and demand. Like steel pricing in the United States in the early 20th century, research and development efforts could also suffer, as the dominant company would have less incentive to reduce costs. , a situation which would only have been amplified by high customs duties stifling foreign competition.

Not only would this lead to job losses in the auto sector, but it would also destroy downstream jobs, slow steel innovation, hamper the deployment of electric vehicles, and create a gaping hole in the anti-Biden-Harris camp (and Republican vice-presidential candidate JD Vance). vision of confidence.

McCall, Biden, Harris and Trump are all wrong. The politicians are basing their comments on their own nativism and McCall’s mistaken belief that Cleveland-Cliffs would be a better partner for the USW. Nippon has, from the start, “promised to respect existing agreements with the United Steelworkers (USW) union”. Nippon has, from the beginning, promised: “No transfer of US Steel production capacity or jobs outside the United States. No layoffs, plant closures or idling of US Steel facilities as a result of the transaction.

A failure of this deal would stem the flow of international investment into this country and create an economic landscape that would run counter to the growth goals of everyone in the White House running for president.

How much are a few tens of thousands of votes worth? God forbid, politicians are forced to be skeptical when forced to put their patriotism and careers on the line. In the absence of their courage, let’s hope they do what they do best: lie .

Vincent Trometter is director of government relations at the nonprofit Competitive Markets Action Inc. in Washington. He has also worked internationally on global trade issues for economic development agency Enterprise Ireland.

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