Why Democrats can’t take the win on U.S. Steel
STEEL DEAL POLITICS — This week could have been a huge victory lap for Democrats and the Biden administration’s industrial policy. Instead, fear of Trump’s megaphone has them stumbling for a coherent message.
On Monday, U.S. Steel announced it would be acquired by Japan’s Nippon Steel for over $14 billion. The deal puts an end to months of negotiations over the fate of the moribund U.S. industrial giant, but it has ignited a firestorm in Washington.
On its face, the steel deal could show the strength of the U.S. industrial economy under Biden. The president’s infrastructure package and Inflation Reduction Act both contained huge incentives for construction firms to buy American-made steel for new bridges, factories and clean energy products. And Biden has kept Trump-era tariffs on steel and aluminum in place for most of the world, protecting U.S. Steel and other domestic producers.
Those policies helped turn U.S. Steel — considered a hollow husk of the American industrial economy only a few years ago — into a highly investable asset. Nippon is paying a 40 percent premium on U.S. Steel’s stock price in the purchase, and the deal is the Japanese smelter’s first major foray into the American market. Global firms don’t do that without expectations of hefty returns.
That could be cause for celebration: a venerated industrial firm from one of our most reliable allies is paying a huge premium to access the fruits of America’s new economic policies. Encouraging foreign investment in the U.S. has always been one of the stated goals of Biden’s new industrial policy — a reversal of decades of outsourcing — and here’s a chief example of the policies paying off for workers and investors alike.
Instead, Rust Belt Democrats are running in the other direction — seemingly scared by the simple fact that Nippon is a Japanese company, and not American.
Pennsylvania Sens. John Fetterman and Bob Casey have urged Biden to block the deal on national security grounds. Sen. Sherrod Brown (D-Ohio) — facing a tough reelection next year — has lamented that the company wasn’t sold to U.S.-based Cleveland Cliffs instead. Moderate and progressive Democratic House members across the Midwest have piled on, as has Biden’s former economic adviser Brian Deese.
Biden, who must run the industrial swing state gauntlet of Michigan, Pennsylvania and Wisconsin to win reelection, has been listening. Late Thursday afternoon, the White House weighed in with a statement saying that the president believes the planned purchase deserves “serious scrutiny” because of potential national security and supply chain concerns.
Most of these arguments are wrong-headed. A deal with Cleveland Cliffs, for instance, was on the table months ago. But the U.S. company was handily outbid by its Japanese opposition — offering $35 per share to Nippon’s $55. Any deal with Cleveland Cliffs likely would have raised antitrust concerns — the combined company would have owned 80 percent of U.S. blast furnace capacity — and could have resulted in redundancies and layoffs due to the firms’ overlapping footprints.
The national security concerns are even thinner. When Trump invoked national security arguments to impose tariffs on imported steel in 2018, the goal was to protect domestic production, not shut out any foreign ownership. The Japanese government is also among the most steadfast U.S. allies in the world and a crucial regional bulwark against China.
Union concerns do give some pause. The United Steelworkers had previously supported an acquisition by Cleveland Cliffs and has spoken out against the Nippon deal. But their current contract with U.S. Steel stipulates that any new buyer must agree to a new labor agreement before completing the acquisition. If Nippon is so hungry for a deal that it will pay a 40 percent premium, some concessions to the union don’t seem out of reach.
So, why the outcry from Democrats? Trump’s specter lurks behind all of these policy discussions, even though he and his allies have yet to weigh in on the deal.
Still chastened by Trump’s 2016 victory in the industrial Midwest, Democrats have bent over backwards for years to appear more “America-first” than the 45th president. That’s the main motivation behind Biden’s aggressive manufacturing policies in the IRA, his preservation of Trump’s tariffs on China, and his decision — with hefty pressure from Midwestern Democrats — to pull back on Indo-Pacific trade talks last month in San Francisco. The November elections chastened Democrats even further, after voters in a rural Michigan town threw out their local government due to its support for a Chinese-owned battery factory — despite the thousands of jobs it promised an impoverished region.
The subtext is the same when it comes to the U.S. Steel deal. Even when the economics could be on their side, Democrats are so afraid of appearing like Clinton-era globalists that they will disavow any investments that come with a foreign flag — even one of our closest allies.
Those protestations won’t protect Democrats from GOP attacks. In Pennsylvania, Casey has already been fending off accusations that he’s soft on China from his Republican challenger David McCormick – despite the fact that Casey is one of the most hawkish Democrats on China and has worked for years to increase oversight of American banks’ activities in the Chinese economy. If Democrats are to recapture the economic narrative, they might do well to take a page from Dan Kildee, the labor-friendly, veteran Democratic congressman from Flint, Michigan, who is retiring next year.
“What we’ve learned is you make the right decisions about the right policies, no matter what [Republicans] are going to turn it into a political question,” Kildee said when asked last week about trade policies in Congress. “So, just do the right thing and we’ll handle the politics later.”
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Source: https://www.politico.com/