Biden’s parting shot: Steel industry will not be sold to Japan

The remainder of Joe Biden’s presidency can already be calculated in hours, almost in minutes. But his constitutional power does not diminish even to the full extent. He has no future, but he has a present, until the very last moment. He still signs orders and issues instructions.

At the end of last week, he made a decision of great significance for international trade, for US relations with one of its most important allies, and for the future of American politics. At the end of a year of struggles, President Biden prohibited the realization of a huge deal to sell US Steel, the steel complex The second largest in America, to the Japanese steel giant Nippon. He did so in the name of US national security needs.

The shadow of the deal has been hanging over Washington, and over industrial centers in the Midwest of the USA, for two years. Unfortunately for the sellers and the buyers, it was wrapped up in the presidential election campaign, and thus became a political game ball. The Japanese did not benefit from their promise to invest 2.7 billion dollars in expanding the production lines in the USA. The logic that guides multinational transactions did not work here. And he did not act first of all because this very word, ‘steel’, vibrates capillaries and hurts exposed nerves. The state of the steel industry, especially in the states of the Midwest (Pennsylvania, Ohio, Indiana), reflects the decline of heavy industry in the US in the last half century. Steel used to be the crown jewel.

The industry has rusted

US Steel was founded in 1901 by the powerful banker J.P. Morgan, and its first president was Charles Schwab, when Morgan and Schwab were still the names of living and active people, not just of the institutions they founded.

America was then in the midst of a revolution, which shifted the weight of its economy from agriculture to industry, turning it into a superpower. Heavy industry began to sink in the last quarter of the 20th century, to such an extent that its production centers began to be called the ‘rust belt’. US Steel was still the eighth largest steel producer in the world in 2008, but dropped to 27th in 2023. It was removed from the S&P 500 index back in 2014. Still, its assets are estimated at almost 20 billion dollars.

In December 2023, US Steel accepted Nippon’s bid – $14.1 billion, or $55 per share. The highest offer from an American investor, James Bouchard, was $7.8 billion, or $35 per share.

The Japanese went out of their way to allay concerns. They promised to keep the company’s offices in Pittsburgh, inside the famous industrial city in Pennsylvania. They promised to honor all the understandings with the trade unions, and they promised to invest in US Steel factories in other parts of the USA, mainly in Gary, Indiana, where the Japanese planned to open a new factory with an investment of 300 million dollars.

Gary, on the southern shore of Lake Michigan, 40 km from Chicago, belongs to the classic category of ‘company town’. It was built in 1906 to house the employees of US Steel. It is named after the The first R of the company, Albert Henry Gary. The decline of steel, from the 1970s onwards, took a heavy toll on Gary.

Its population today is two-thirds smaller than it was in 1960. Her municipality had to sell buildings for one dollar, because she did not have the resources to demolish them herself. The tragedy is especially great because most of the city’s residents are black (80%), and it was the first in America where a black mayor was elected, in 1967.

“There will hardly be any land left”

President Biden, in the midst of an election year, and long before he withdrew from the race, announced last March that he intends to oppose the deal on the grounds that it will harm the national security of the United States.

Here there was agreement between him and Donald Trump. The latter owed much of his victory in the 2016 election to a promise that he would save the American steel industry, returning the jobs lost to competitors across the border and overseas, from Mexico to India to China, from Turkey to Brazil. The promise raised considerable skepticism from the start, but it appears to have produced enough votes to give Trump a narrow victory in Pennsylvania, a crucial element in his electoral equation.

In the second year of his presidency, Trump imposed punitive tariffs of 25% on steel imports to the US and 10% on aluminum imports. In a meeting with the CEOs of the industries, he declared, “When we reach the day when our country can no longer produce aluminum and steel, it will almost never give up We have another country.” Even his supporters on Wall Street shook their heads.

Both Trump and Biden used the 1962 law, which gives the president the authority to limit imports, if the Commerce Department determines that it poses a threat to national security.

The extension of the decision time raised hopes in the business community that Biden would approve the sale, saving the need to run into a wall in the form of a refusal from Trump. But the aging Democratic president seems to have decided that the parting shot of his presidency had better align with his reputation as a friend of the unions, which opposed the deal. The president was born in a small industrial town in Pennsylvania called Scranton, in the heart of an area of ​​coal mines. In its heyday, Scranton was the meat of the coal-dependent steel economy.

lost the workers

The Democratic Party regrets its harmful ‘globalist’ identification, from the 1990s onwards. The Labor and Union Party became a major supporter of free trade, which fundamentally changed the employment equation in America. Democratic presidents (Clinton, Obama) did not make a difference in converting the workforce from traditional industries to the information economy and elite technology. The result was a gradual and catastrophic loss of labor support, especially in the Midwest.

Thus the ground was prepared for the introduction of anti-globalist populism. Donald Trump is the inevitable result. He does not hesitate at all in attributing a ‘threat to national security’ to historical allies of the US. Which is not the case with Biden. He has put a lot of effort into fortifying alliances and stabilizing them.

Japan is an absolutely vital link in the US defense system against China in the Eastern Pacific. 50 thousand American soldiers are stationed on its land. Washington has just approved the sale of air-to-air missiles to Japan for $3.64 billion. Japan is the largest foreign investor in the US, and it supports a million jobs.

The assertion that a Japanese corporation threatens America’s security is an insult to Japan’s dignity as well as common sense. According to reports, Biden’s national security adviser, Jake Sullivan, opposed the decision. Politically, she came much too late. Over the weekend, Trump issued a complimentary assessment of Biden on his social media account: “The worst president in the history of our country.” nice.