Biden's Nippon Steel Block Sets Risky Precedent for Future CFIUS Reviews, Analyst Says
President Joe Biden’s decision to block the proposed acquisition of U.S. Steel by Japan-based Nippon Steel (see 2501030009) “creates troubling risks to the United States’ global economic standing that could only worsen in the years to come,” Sarah Bauerle Danzman, a resident senior fellow with the Atlantic Council, wrote in a blog post for the think tank last week.
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Biden’s decision came less than two weeks after the Committee on Foreign Investment in the U.S. told U.S. Steel it had been unable to reach a consensus on the acquisition (see 2412240035). Bauerle Danzman noted that CFIUS appeared to be split on that decision and couldn't agree on whether there was an unmitigable national security risk, but Biden appeared to decide that any foreign ownership of U.S. Steel, even by a major ally, is an “unacceptable and unmitigable” national security risk because steel is a critical supply chain.
“This is a major expansion of how CFIUS has traditionally interpreted national security,” Bauerle Danzman said, adding that it also “runs counter” to the Biden administration’s September 2022 executive order that described various factors CFIUS should consider during a review (see 2209150053 and 2209260076). That order didn’t list steel as a critical supply chain and stressed that CFIUS should consider “alternative suppliers and capabilities in partner and allied countries (such as Japan),” she said.
“The decision to label Nippon’s proposed acquisition of US Steel as a national security concern directly contradicts the administration’s own articulation of national security assessments,” she said, adding that it could “open the door for increasingly dubious claims of national security concerns to justify interventions into transactions for broader economic competitiveness reasons or to favor domestic political allies.” It also could cause other countries to follow suit and use “similar reasoning to protect their own industries in ways that disadvantage US commercial interests.”