Blocking Steel Mergers for Political Gain Sends Wrong Message to Foreign Investors
With the presidential race going into its final stretch, every and all political capital that candidates can make in key swing states is being exploited, including union and trade demands that counter long-term American interests.
A recent steel merger controversy displays this problem in extensive detail.
Since late last year, the planned acquisition of U.S. Steel by Japan's largest steelmaker, Nippon Steel, has made both economic and political waves.
Recently, the Committee on Foreign Investment in the United States (CFIUS) advised against the acquisition, arguing that after the merger, the United States government would be less likely to seek steel tariffs from foreign entities.
This seemed odd, given that the CFIUS is a non-political body, and the arguments in favor of the merger were apparent from the perspective of jobs, investments, taxes, and the long-term economic viability of vital American industries.
Foreign direct investment (FDI) into the United States represents trillions of dollars each year, creating American jobs and successful American affiliates.
In fact, no successful country in the world survives without FDI, and those who have very little of it turn out to be socialist hellscapes.
Numerous U.S. business groups, including the U.S. Chamber of Commerce, Alliance for Automotive Innovation, National Foreign Trade Council and United States Council for International Business wrote in a letter to U.S. Treasury Secretary Janet Yellen, explaining that they "fear that the CFIUS process is being used to further political agendas that are outside the committee's purview and putting the U.S. economy and workers at risk."
President Biden and Vice President Kamala Harris have come out against the merger, unsurprisingly so, given that the U.S. Steel. United Steelworkers (USW) would lose influence following an acquisition.
It appears not only that unions more recently have disregarded the economic effects of their actions, but also that Kamala Harris is scrambling for every vote in steel-producing swing states. With terrible consequences.
If the executive allows bodies like the CFIUS to become a pawn for the priorities of the White House, it loses credibility --- but more importantly credibility will be lost with foreign allies.
There are good reasons to block mergers with companies emanating from communist China, but preventing acquisitions from friendly nations such as Japan, Korea, Australia, or the E.U., what signal does that send?
Also, how can we expect allies to conduct proper business with American firms attempting to acquire foreign businesses in those countries?
The United States is a trustworthy global economic superpower, and it makes moral judgements on which nations it chooses to engage with. If Japan and other Western-oriented powers will be prevented from entering the American market for short-term political tinkering, then the spotlight may very well go off for American industries.
According to the Bureau of Economic Analysis, "majority-owned U.S. affiliates of foreign multinational enterprises employed 7.94 million workers in the United States in 2021, a 2.9 percent increase from 7.71 million workers in 2020."
In 2023, the total foreign direct investment (FDI) in the United States reached $5.39 trillion, reflecting an increase of $227 billion compared to the prior year.
This figure represents approximately 20% of the nation's GDP, underscoring the critical role of FDI in not just sustaining the U.S. economy, but helping it grow and create jobs.
Depending on where you stand on the political spectrum, FDI might very well contradict your worldview in which each revival of the industry has to be either a punitive tariff on competitors or through a government subsidy program costing American taxpayers.
FDI is neither of those things; it represents money from outside of the U.S. that sustains the economic power of the country. And that, if you ask me, is worth more than the union vote in a particular election year.
Bill Wirtz is the senior policy analyst at the Consumer Choice Center, focusing on new technology, agriculture, trade and lifestyle regulations. He recently published "No Copy-paste: What Not to Emulate from Europe's Agriculture Regulations." Read Bill Wirtz's Reports — More Here.