National Review Online
Wednesday, December 4, 2024
About a year ago, we wrote an editorial about the acquisition of an antiquated mid-cap
corporation by another firm. This sort of thing happens all the time, and we
don’t normally editorialize on such deals. Bipartisan groups of senators don’t
usually care about such deals either, but in this case, one did, so we wrote to
defend the rights of shareholders against their meddling.
The senators were objecting to the sale of U.S. Steel to
Nippon Steel, the Japan-based firm that is the fourth-largest steel producer in
the world. The bipartisanship of some politicians’ resistance has continued
since then. President Joe Biden, Vice President Kamala Harris, President-elect
Donald Trump and Vice President-elect JD Vance (one of those senators) have all
announced their opposition to the acquisition, as though they hold the right to
approve such a transaction.
They do not. U.S. Steel is not owned by the U.S.
government, and Nippon Steel is not owned by the Japanese government. These are
both publicly traded companies owned by their shareholders, who approved the
acquisition after a bidding process took place. This result ought not be a
concern for the federal government, or for conservative magazines.
Yet the federal government has made it one, so we will
comment again. Trump said on Monday that he “will block this deal from
happening” when he assumes office and instead will use “a series of Tax
Incentives and Tariffs” to “make U.S. Steel Strong and Great Again, and it will
happen FAST!”
Elon Musk and Vivek Ramaswamy are looking for ways to
enhance “government efficiency.” Blocking a multibillion-dollar investment from
a company based in an allied country and replacing it with a Rube Goldberg
machine of tax incentives and tariffs doesn’t seem very efficient.
As for whether it will happen “fast,” U.S. Steel is
already a beneficiary of tax incentives, tariffs, anti-dumping measures, import
quotas, “buy American” rules, and federal pension guarantees. If that extensive
government involvement over decades isn’t getting Trump the results he wants,
there’s little reason to believe another round of tariffs and subsidies will do
the trick.
When people complain about trade deficits, they object to
sending dollars abroad in exchange for goods. But those dollars come back in
the form of investment in the U.S., such as this deal from Nippon Steel. Japan
is the No. 1 source of foreign direct investment in the U.S., and the U.S. is
the No. 1 destination for foreign direct investment of any country in the
world.
The nearly 1 million Americans who are currently employed
by Japanese companies would tell you how beneficial these investments can be.
One of them was JD Vance’s grandfather, who was employed at Armco, a steel
company that was bought out by Kawasaki. As Vance records in Hillbilly Elegy,
“Kawasaki gave Armco a chance, and Middletown’s flagship company probably would
not have survived without it.” U.S. Steel has warned that without the Nippon
Steel investment, it could close mills and move its headquarters from
Pittsburgh.
Presidents have intervened to block corporate
acquisitions under the aegis of the Committee on Foreign Investment in the
United States only eight times. Never has this extraordinary power been invoked
for steel or against a company from Japan.
If a Chinese or Russian or Venezuelan state-owned company
was buying out a defense contractor, the federal government would have a
national-security case to intervene. That is not happening, nor is anything
like it. In fact, there’s a case to be made that the deal will enhance national security by forging a stronger U.S.-Japan
alliance against China and delivering a U.S. Steel more able to meet defense
needs.
If the federal government wants to say anything at all
about this deal, a simple “thank you” would suffice. But ideally it would be
silent, as it is for most mid-cap acquisitions, presuming that shareholders
know best what to do with the companies they own.
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