Every election season a raft of economically questionable policies are floated by candidates in a misguided attempt to win votes. Often involving heavy-handed market interventions, these proposals may sound appealing to the electorate, but often stifle economic vitality and can lead to long-term negative consequences.

A prime example of this troubling trend is currently unfolding on the campaign trail. The proposed acquisition of U.S. Steel by Japanese-owned Nippon Steel has become a hot button issue, with some politicians attempting to use national security as a pretext to meddle in free markets.

As a free market economist, I would generally support the sale. But the national security issue is concerning. Steel is needed to produce defense equipment and bullets. If foreign ownership of a vital industry is allowed, the foreign entity could stop producing steel. The federal government can order an American to produce, but a foreign owned company may be more difficult.

The long-term problem with opposing this sale, is that foreign direct investment in the U.S. could decline. Usually, the government policy is to encourage foreign investment. By discouraging foreign invest, the U.S. economy and its workers face a significant risk. Under no circumstances should this decision be politicized.

Central to the debate is the Committee on Foreign Investments in the United States (CFIUS) and the role that it plays in this process. A five-decade-old interagency panel that is tasked with investigating foreign investments in American companies to determine potential national security risks, it has historically been regarded as an independent, non-political arbiter, focused solely on defending U.S. national security while championing economic openness.

However, with a CFIUS review as the final hurdle to clear before Nippon Steel’s acquisition of U.S. Steel can move forward, it appears that the White House and some members of Congress have been trying to exert influence on the panel to stop the deal. Doing so could be viewed as a dangerous misuse of the mandate CFIUS holds that could harm the American.

For starters, blocking this transaction could weaken American economic competitiveness and supply-chain resilience. Nippon Steel has pledged nearly $3 billion to upgrade aging mills that U.S. Steel operates, a capital outlay that would boost domestic steel production and enhance productivity. The CEO of U.S. Steel has openly stated that the company lacks the financial resources to make such investments independently, so by stopping this deal America could miss out on a crucial opportunity to revitalize a key industry and strengthen domestic manufacturing capabilities.

Such actions could also discourage future foreign direct investment (FDI). The United States currently receives around $5 trillion in FDI annually supporting 7.9 million jobs. Japan, in particular, stands out as a top investor in America, contributing almost $712 billion in 2022 alone. Sending a message that the country discourages FDI or that investments are subject to political whims rather than merit-based evaluations – and specifically aiming such a message at one of the biggest investors in the United States – could have devastating long-term consequences for our economy.

Perhaps most alarmingly, politicizing the CFIUS process could trigger a protectionist spiral globally. If the U.S. sets a precedent of using national security as a cover for anti-competitive policies, other countries may feel emboldened to follow suit. As a group of business leaders echoed these concerns in a recent letter where they warned that "U.S. companies seeking to make investments abroad will be vulnerable to reciprocal action as a result of politicizing the U.S. review process. Such a decision would give license to foreign governments to protect national champions even when a specific investment presents no national security risks."

Fortunately, the opportunity for a paradigm shift has emerged. News reports from early September indicated that the White House was preparing to block the deal, but U.S. Steel and Nippon Steel have withdrawn their CFIUS application and resubmitted it in response. This reset will not only allow committee members more time for review but will postpone the decision until after the election, hopefully removing politics from the equation and allowing the deal to be decided solely on its merits.

At a time when economic resilience and innovation are now more critical than ever, the time has come for leaders in Washington to put aside short-term political calculations. For the sake of the long-term economic health of our nation, CFIUS cannot be allowed to become a tool to further political agendas by using national security as a cover for setting industrial policy. Getting it right on U.S. Steel-Nippon Steel deal is an important step towards ensuring that does not happen.

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Michael Busler is a public policy analyst and a professor of finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in finance and economics. He has written op-ed columns in major newspapers for more than 35 years.