© Reuters. FILE PHOTO: The logo of Nippon Steel Corporation is displayed at the company headquarters in Tokyo, Japan in this photo taken by Kyodo May 1, 2019. Mandatory credit Kyodo/via REUTERS
By Andrea Shalal
WASHINGTON (Reuters) -The White House on Thursday said Nippon Steel Corp’s $14.9 billion proposed acquisition of U.S. Steel Corp deserves “serious scrutiny,” given the company’s core role in U.S. steel production that is critical to national security.
In its first substantive statement on the deal, the White House said it viewed a strong domestic steel industry as vital to the U.S. economy and national security and supported a careful review of the transaction by the Committee on Foreign Investment in the United States.
National Economic Council Director Lael Brainard said President Joe Biden welcomed manufacturers from the across the world investing in U.S. jobs and workers.
“However, he also believes the purchase of this iconic American-owned company by a foreign entity – even one from a close ally – appears to deserve serious scrutiny in terms of its potential impact on national security and supply chain reliability,” she said in a statement issued late Thursday.
“This looks like the type of transaction that the interagency committee on foreign investment Congress empowered and the Biden administration strengthened is set up to carefully investigate,” she said. “This administration will be ready to look carefully at the findings of any such investigation and to act if appropriate.”
The strongly worded White House statement comes amid growing criticism of the proposed deal by both Democratic and Republican lawmakers and the powerful United Steelworkers (USW) union, the main union at the third largest U.S. steel company.
Nippon Steel’s U.S. representatives and U.S. Steel did not immediately respond to requests for comment.
U.S. Steel’s shares are trading well below the $55-per-share deal value, indicating investors anticipate that the political controversy around the deal could lead to delays.
The union welcomed Brainard’s statement and her emphasis on the deal’s potential national security impact.
“Our union shares many of the concerns expressed in today’s White House statement, including how this deal may impact the future of domestic steel production,” USW President David McCall said in a statement.
“U.S. Steel has made it clear, time and again, that its first and only priority is short-term financial gain for shareholders, even if this comes at the expense of workers, their communities and the nation’s lasting capacity to continue meeting its manufacturing needs,” he added.
Four Democratic and three Republican U.S. senators have criticized the deal this week, citing national security concerns or raising questions about why the two companies did not consult the United Steelworkers ahead of the announcement.
Nippon said on Monday it would buy Pittsburgh-based U.S. Steel for $14.9 billion in cash, prevailing over rivals such as Cleveland-Cliffs (NYSE:), ArcelorMittal (NYSE:) and Nucor (NYSE:) in an auction for the 122-year-old steelmaker.
Brainard said Biden viewed U.S. Steel as an integral part of America’s “arsenal of democracy” during World War Two and believed it remained “a core component of the overall domestic steel production that is critical to our national security.”
Heading into an election year, Biden has made restoring U.S. manufacturing a central pillar of his presidency, and often hails the creation of 800,000 manufacturing jobs during his term.
Brainard said Biden had also taken action to protect U.S. steel companies against unfair and market-distorting trade practices in China and other countries, while supporting union jobs across the economy.
She said the administration was doing everything it could to ensure steelworkers could compete on a level playing field by fighting unfair trade practices.
Heino Klinck, a retired U.S. Army colonel who served as deputy assistant secretary of defense for East Asia under former President Donald Trump, said calling the deal into question on national security grounds could harm the U.S.-Japan alliance.
“It’s unfounded. It could make us look hypocritical at best, and at worst, xenophobic,” Klinck told Reuters, adding that he did not expect Japan to ever stand in the way of surging production to aid the U.S. Navy, a key U.S. Steel customer.
“The Japanese will be offended, and I think it will serve Chinese mis- and disinformation campaigning both in Japan and regionally,” he said.
This story originally appeared on Investing
