President Biden hosted a summit with Japanese Prime Minister Fumio Kishida in early April. The ceremonial dinner was April 9 and the working sessions begin April 10. The summit is primarily about defense issues, but Nippon Steel tried to crash the party.
Nippon made a deal to acquire US Steel, which was approved on April 12 by USS shareholders. President Biden has already said that he considers this purchase against the national interest, and he has the power to block it after a review by the interagency Committee on Foreign Investment in the US (CFIUS). The steelworkers union (USW) is also adamantly opposed.
At the working sessions of the summit, Nippon hoped to enlist Japan’s Minister of Economy, Trade and Industry, Ken Saito, to press his American counterparts to support the deal. Saito met with several top officials, including Commerce Secretary Gina Raimondo, Treasury Secretary Janet Yellen, and National Economic Council Director Lael Brainard.
Talking points obtained by The American Prospect suggest that Saito told these officials that challenging the Nippon deal would give a “chilling signal” to Japanese investors that they will “face unfair treatment” in the US, and that Nippon’s acquisition would “strengthen US economic and national security by bolstering domestic steel production, and reinforce both countries’ shared values and deepen the mutual reliance that benefits our national interests.”
Nippon has also gone on a charm offensive to try to enlist the Steelworkers as an improbable ally. According to a draft letter agreement also seen by the Prospect, Nippon has offered to invest $1.4 billion in US Steel’s older facilities that USS has been closing, and to refrain from layoffs through the end of the Steelworkers’ current contract in 2026. Nippon also offers to comply with regular pension contributions.
On April 5, US Steel CEO David Burritt released a letter to employees and shareholders endorsing Nippon’s commitments.
But I had a long talk with Steelworkers president Dave McCall, who was Biden’s guest at the summit, and McCall points out that every single offer is full of loopholes. McCall told me that the parent company, Nippon Steel of Japan, is not offering to sign anything. Rather, it is proposing that its US subsidiary and US Steel, if its acquisition goes forward, be the signatories, which has no legal force if anything happens to either of them.
“This sets up years of litigation,” McCall said. “They say, once the US Steel deal is complete, that there will be no reduction in force through the end of our contract in 2026, unless it’s a planned layoff or idling, or closure, or change in their business plan. That’s worth nothing. They say they’ll share tech with USS, unless they find it to be economically adverse to their investment in their own strategy.”
“We hope that the CFIUS process takes place sooner rather than later,” McCall added, “so that the president can make a decision on national-security issues. It’s important that we maintain blast furnaces in this country. [US Steel has] already shut down three blast furnaces in the past three years.”
In response to President McCall’s comments, a Nippon spokesperson, Monika Driscoll, emailed me a prepared statement: “On March 27, Nippon Steel Corporation delivered a set of written commitments to the leadership of the USW that are not only above and beyond the obligations contained in [US Steel’s] Basic Labor Agreement (BLA), but that will also be legally binding and enforceable.”
McCall obviously disagrees.
So if Nippon thinks they can co-opt the Steelworkers Union as an ally, with loophole-ridden promises, they are underestimating their opposition. “We recognize that Japan is a military ally,” McCall said. “That doesn’t make them an economic ally. We already have 12 cases against Nippon for dumping and other instances of unfair trade.”
Nippon also has a long record of investing in China and helping the Chinese develop their own steel industry, which dumps subsidized steel worldwide. A recent investigative report by Horizon Advisory documented Nippon’s extensive operations in China. Sen. Sherrod Brown (D-OH) flagged the report in a letter to President Biden opposing the Nippon USS takeover. “Nippon’s connection to the Chinese steel ecosystem and industrial policy agenda has concerning implications regarding ties to China’s military-civil fusion strategy and quest for global economic power,” said Brown.
Despite Nippon’s efforts to enlist the Japanese government to treat Nippon as a national champion and a prime topic for the summit, my sources say that the Japanese prime minister may well treat the Nippon issue as a distraction from more important bilateral issues, especially defense in the context of China’s increasing military aggressiveness.
Biden has already made clear that he is opposed to this takeover. It would be very surprising if he reversed himself now; and the Japanese government has to know that pressure on him to do so would be a waste of diplomatic leverage.
Robert Kuttner is co-editor of The American Prospect (prospect.org) and professor at Brandeis University’s Heller School. Like him on facebook.com/RobertKuttner and/or follow him at twitter.com/rkuttner.
From The Progressive Populist, May 15, 2024
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