The administration’s approach to US Steel undermines the law, national security and innovation

It is no coincidence that the United States is the world leader in innovation. The main reason we have an advantage over other countries and the European Union is that many countries follow the European model, which relies so much on regulation. However, when it comes to the proposed merger of US Steel and Nippon Steel, the Biden administration is making EU regulators look libertarian.

European regulators believe it is their job to combat corporate mergers. This sometimes results in lower prices for consumers, which is almost always accompanied by less investment by businesses and the production of lower quality goods and services.

Generally speaking, US antitrust regulators take action in response to evidence of consumer harm, while EU regulators tend to block mergers to prevent purely speculative harm – whether or not harm ever occurs.

America’s reluctance to pursue tough antitrust laws helps explain why the United States is leading in areas like artificial intelligence and seeing GDP growth at times when Europe lags in both technological progress and economic growth.

So it’s eye-opening to learn that the EU recently approved Nippon Steel’s takeover of US Steel while Washington bureaucrats bury the deal in a mountain of red tape. It’s a sad situation when the EU’s famously tough regulators are quick to see the huge benefits of a proposed steel merger, while the US is pouring billions of dollars in key investments to spur innovation in domestic steel production in regulatory land.

Electoral and interest group politics are apparently the cause of this role reversal. Both US Steel and its United Steelworkers union are based in Pennsylvania, a state that the Biden campaign must win. Because the union aligned with its corporate partner Cleveland-Cliffs in opposing the agreement, President Biden broke precedent and put his finger on the scale against a takeover.

Nippon Steel is headquartered in Japan, perhaps the United States’ closest ally. That makes the deal subject to review by the Committee on Foreign Investment in the U.S., or CFIUS, chaired by Treasury Secretary Janet Yellen. CFIUS is supposed to investigate transactions involving foreign entities, focusing narrowly on national security rather than political influence. That’s partly why CFIUS reviews transactions in secret.

An acquisition by a Japanese company would typically be an easy approval for CFIUS, given our countries’ close economic and military ties. However, President Biden has politicized the process by issuing White House statements saying that US Steel should remain American owned, even if it comes at the expense of greater job security for American workers and an influx of investment and know-how for the US steel industry.

Union allies, including Sen. Sherrod Brown, say Nippon’s small corporate footprint in China creates serious national security concerns. Senator Brown’s claims were based on a report issued by private consulting firm Horizon Advisory.

However, Horizon Advisory has quietly withdrawn numerous false claims about Nippon’s presence in China. Politico made at least six major corrections to the report, all of which addressed claims that Nippon was more closely tied to Beijing than is true. The corrections indicate a clear lack of concern about the security of the transaction.

President Biden clearly sees CFIUS intervention as being in his political interest. Without it, the reasoning goes, the union could abandon him and leave him in Pennsylvania more vulnerable in elections than he is now.

Regardless of his political assessment, the sitting president’s violation of the spirit of the law by intervening in an agreement between two companies seeking to unite and compete with China’s domination of the global steel market sets a disturbing precedent. Putting the politics of union bosses ahead of the nation’s security is both shortsighted and politically cynical.

The administration’s firing of a leading Japanese company is not the latest affront to our Asian ally. The president recently rubbed salt in the wound by stating that the Japanese are “xenophobes.” Japan reacted restrainedly, noting that Biden’s comment was unfortunate and inaccurate.

The Biden administration should stop underestimating our most important ally in the competition with China. A good place to start would be to allow CFIUS to do its job as authorized by Congress and allow the EU to regain leadership in its regulatory self-failure.

Gerard Scimeca is co-founder and president of Consumer Action for a Strong Economy (CASE), a free-market consumer organization.