President Biden’s The decision to block Nippon Steel’s proposed $14 billion takeover of US Steel was based on national security concerns, a rationale that has led to backlash.

Biden announced the decision on Friday after the Committee on Foreign Investment in the US (CFIUS) deferred the decision to the president after it failed to reach a consensus in its review. The president’s order cited “credible evidence” that Nippon Steel “may take actions that threaten to harm the national security of the United States,” although the order did not elaborate on those concerns.

In an accompanying statement, Biden explained that a “strong, domestically operated steel industry represents an essential national security priority” and added that he “will never hesitate to act to protect the security of this nation and its infrastructure, as well like the resilience of their nation’s supply chains.”

US Steel and Nippon Steel released a statement condemning the decision block the deal as “illegal” and said the commitments made by Nippon Steel would have strengthened national security. The companies noted that they offered to prohibit the transfer of any production and jobs outside the U.S., as well as give CFIUS the ability to veto any production cuts at U.S. steel facilities during the next 10 years to calm concerns about steel supplies and their impact. on national security.

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US Steel has warned it may have to close facilities if its acquisition by Nippon Steel fails. (Photo: Justin Merriman/Bloomberg via Getty Images/Getty Images)

However, they said CFIUS “failed to give due consideration to a single mitigation proposal offered … as evidenced by the absence of any written comments to the four national security settlements that the parties proactively offered for 100 days.” The companies added that “the CFIUS process was deeply corrupted by politics, and the outcome was predetermined, without an investigation on the merits, but to satisfy the political goals of Biden White. home.”

Nippon Steel also pledged to invest at least $2.7 billion to modernize US Steel’s Mon Valley Works near Pittsburgh and the Gary Works in Indiana to allow those steelmakers to better compete with international rivals. US Steel CEO David Burritt said earlier The Wall Street Journal that the company wouldn’t be able to do it if the deal falls through because “I don’t have the money.”

The two companies said in Friday’s statement that they continue to believe the deal “is the best way to ensure that US Steel, and in particular its facilities represented by USW, can compete and thrive in the future.” US Steel and Nippon Steel added that they “will take all appropriate steps to protect our legal rights and secure that future.”

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The decision of the White House was praised by the United Steelworkers union (USW).. USW International President David McCall said Nippon is a “serial trade cheat who for decades worked to undermine our domestic industry by dumping their products into our market”.

He added that the purchase would have allowed Nippon to “destabilize our trading system from within” while undermining “our ability to meet our own national security and critical infrastructure needs.”

“It is clear from US Steel’s recent financial performance that it can remain a strong and resilient company. We now call on US Steel’s board of directors to take the necessary steps to allow it to continue to thrive and be profitable,” he said McCall.

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US Steel and Nippon Steel said they plan to take steps to protect their legal rights. (Justin Merriman/Bloomberg via Getty Images/Getty Images)

Scott Lincicome, vice president for general economics and the Stiefel Trade Policy Center at the Cato Institute, noted in a blog post that the deal was supported by a an independent arbitral tribunal chosen by US Steel and USW, as well as 98% of US Steel shareholders when the deal was put to a vote.

Lincicome pointed out that the Treasury, State, and Defense departments concluded that the deal posed no security risk, and that many independent national security and foreign policy experts saw the deal as a way to strengthen national security and ties with a close ally of Japan.

He added that while the companies may ultimately prevail in a legal challenge to Biden’s decision to allow the deal to proceed, the president’s action “risks damaging the US investment review process ; the US-Japan relations; the position of the United States as a welcoming place for foreign investments cannot be used as political favoritism and economic protectionism.”

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President Joe Biden blocked the deal citing national security reasons. (Ron Sachs/CNP/Bloomberg via Getty Images/Getty Images)

Alexis Early, a partner at Jenner & Block whose practice includes a focus on CFIUS matters, said in a statement that “the decision appears political, tied to economic securityand not supported by serious, unsolvable national security issues.”

He also noted that the decision could undermine efforts to strengthen ties with a close ally that are needed to help counter China’s growing influence. Japan is party to a mutual defense treaty with the US and has been a crucial partner in economic and defense initiatives.

“Low-risk foreign investors will think twice before voluntarily submitting to such an arbitrary and incomprehensible process,” he added. “As the daughter of a Pennsylvania steelworker and a CFIUS attorney, I have watched this deal very closely. CFIUS deviated from its core national security responsibility by focusing on a subset of criticism economic”.

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Jason Furman, professor of economic policy at Harvard who chaired the Council of Economic Advisers for much of President Obama’s second term, also criticized the Biden administration’s decision to block the deal.

“President Biden’s claim that Japan’s investment in an American steel company is a threat to national security is a pathetic, cowardly ploy by special interests that will make America less prosperous and less secure,” he wrote Furman in a post on X. “I’m sorry. to see him betray our allies while abusing the law.”