Waving the flag as he heads into election season, President Biden is opposing the acquisition of U.S. Steel, a once-great steel maker headquartered in Pittsburgh, by a bigger and stronger Japanese company, Nippon Steel. “I told our steel workers I have their backs, and I meant it,” Mr. Biden said in a statement. “U.S. Steel has been an iconic American steel company for more than a century, and it is vital for it to remain an American steel company that is domestically owned and operated.”
No doubt, Mr. Biden hopes to counter the nativist appeal of Donald Trump, especially in a state with a long history of anti-free trade sentiment. (Abraham Lincoln carried Pennsylvania 164 years ago on the strength of the Republican Party’s pro-tariff stance.)
But blocking the purchase would be destructive to American interests overseas and at home. First off, U.S. Steel is far from the icon Mr. Biden says it is. Within the industry, it ranks third in the United States and 27th in the world. Once America’s third-largest company, today it ranks 186th on the Fortune list.
Moreover, Nippon Steel’s nonhostile $14.1 billion deal is clearly in America’s interest as well as in the workers’ interest. The Japanese company, which already produces steel in the United States as well as in Latin America and across Asia, won the sale in the boardroom by offering roughly twice as much as a domestic competitor, Cleveland-Cliffs. Nippon has promised to inject needed capital and technology to make the century-old former icon more competitive. It also promises that U.S. Steel will keep making its steel in the United States and keep its headquarters in Pittsburgh.
But Cleveland-Cliffs has been lobbying the Biden administration hard, and so has the United Steelworkers union, to block the deal. Yesterday, the union rewarded Mr. Biden by endorsing him for re-election.
Legislators in both parties have jumped on the populist bandwagon. Senator Bob Casey, running for re-election in Pennsylvania, said he would “work like hell against any deal that leaves our steelworkers behind.” Never mind that under red-white-and-blue American ownership, U.S. Steel’s work force plummeted from 340,000 during World War II to about 22,000 today.
What hurts is to see Mr. Biden imitating Mr. Trump, who has vowed, if elected to a second term, to block the Nippon acquisition “instantaneously.” Mr. Biden’s statement of opposition was slightly weaker; he denounced the deal without explicitly vowing to kill it. Still, rather than confront the defeated former president in an instance where Mr. Trump was wrong on the merits, Mr. Biden pandered to Mr. Trump’s followers.
This mirrors Mr. Biden’s general approach on trade, fairly characterized as Trump-lite. He suspended some of Mr. Trump’s tariffs but left others solidly in place. He stuffed his signature Inflation Reduction Act with numerous “Buy American” requirements offensive to U.S. allies. The best that can be said for Mr. Biden on this front is that his protectionism is inconsistent, whereas Mr. Trump’s is a coherent part of his poisonous America First ideology.
Mr. Trump’s worldview is of America as fortress. Mr. Biden’s is not. Mr. Biden recognizes that what happens beyond America’s borders, as in Ukraine and Gaza, is vitally important to the United States. His economic nationalism in this instance is out of place with the respect he purports to show for American allies.
The great lesson of the 1930s and ’40s was that trade was important beyond its economic aspect — it was vital to international security. The international economic crisis and World War II were successive acts in an interrelated nightmare, first trade barriers and currency wars, then worsening depression, aggressive nationalism and shooting war.
It did no good to bankrupt rival nations, as the allies, led by France, attempted with Germany after World War I. Germany did not respond well. It did no good to enact protective tariffs because other nations would surely retaliate — but the U.S. Congress did so anyway, enacting the Smoot-Hawley tariff (over the protests of more than 1,000 economists) in 1930, worsening the Great Depression.
After World War II, the victors — led by the United States — reckoned from bitter experience that the catastrophe of the war had its seeds in the economic nationalism that preceded it.
The allied effort to build a new international order included not just political safekeeping organizations such as the United Nations and military alliances such as NATO but also economic collaboration such as the World Bank, the I.M.F. and Bretton Woods.
The postwar aim was not to make our friends, or even our rivals, suffer. It was to see them prosper. Preventing international depression was just as important as preventing war. In contemporary (Trumpian) terms, making Mexico “pay” would have been stupidly self-defeating. The worse Mexico does, the more migrants cross our border.
Economists today are just as persuaded as in 1930 that trade, in general, makes all countries richer, albeit those affected in specific industries merit assistance and retraining. In recent decades trade has achieved a miracle, helping to lift millions in the developing world out of poverty. To retreat from internationalism is to retreat into a blinkered world of shrinking economic pies, in which each principality protects what it has rather than contributes to growth. Closed markets foster narrow thinking and nativist, prejudiced societies. We have seen the political benefits from trade in our own lifetimes. American military strength helped to win the Cold War, but so did the example of American capitalism, which other people wanted in on. More than missiles, they wanted McDonald’s.
The White House has suggested that U.S. Steel’s acquisition by Nippon, the world’s fourth-largest steel maker, will be subject to a national security review by a group with White House and cabinet-level participation known as the Committee on Foreign Investment in the United States. The notion that foreign ownership of an American steel plant poses a national security risk is ludicrous — steel is not in short supply, and Japan is friend, not foe.
A negative decision would chill future investment in the United States and wound America’s partner in the Pacific, a vital relationship as tensions with China rise. Among the Japanese, it would revive memories of bygone racism. (According to The Wall Street Journal, Lourenco Goncalves, the chief executive of Cleveland-Cliffs, was heard on a private call with investors appearing to mock the accents of Nippon executives.) Not a way to treat an ally.
Mr. Trump is immune to such arguments. Mr. Biden should know better.
Roger Lowenstein is a journalist and the author of “Ways and Means: Lincoln and His Cabinet and the Financing of the Civil War.”
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