Biden, Cfius and the U.S. Steel Acquisition

Are his remarks empty rhetoric or an attempt to subvert the law?

By Thomas P. Feddo.

"President Biden weighed in last month on Nippon Steel’s proposed acquisition of U.S. Steel. “It is vital,” he said in a statement, for the latter “to remain an American steel company that is domestically owned and operated.” Soon after, the United Steelworkers endorsed the president. This may be an empty election-year promise. If it isn’t, it’s a pledge to subvert the law and cripple a vital national-security tool in the process.

The only obvious way to stop the acquisition is through the Committee on Foreign Investment in the U.S., or Cfius, a nearly 50-year-old interagency panel that scrutinizes cross-border deals to determine whether they could harm national security. The two steel companies had filed for Cfius review a week before the president’s statement.

Cfius is composed of nine cabinet officials and led by the Treasury secretary. Its work is confidential, rigorous and fact-based, and its statutory remit concerns only national security. Congress mandates Cfius conduct its analysis in secret and precludes the president from dictating its decisions. Mr. Biden’s statement didn’t mention Cfius or national security, but it’s reasonable to suspect he hoped to influence the committee.

But an adverse ruling from Cfius would clearly be improper. Under the committee’s statutory analytical framework, Nippon Steel’s acquisition of U.S. Steel poses no national-security risk to the U.S. The committee primarily considers a foreign investor’s intent and capability to harm U.S. security, together with the character of the work done by the U.S. business that could be exploited. Nothing in this steel-making transaction risks compromising cutting-edge technology, critical infrastructure, sensitive data or the defense industrial base’s supply chain.

Nippon Steel’s investment in U.S. Steel promises to enhance American production capacity and strengthen geopolitical ties between the U.S. and Japan in the face of Chinese aggression. Japan is of indispensable strategic importance, not least because of its supporting U.S.-led export controls and collaborating on regional defense matters. Last month the U.S. Navy secretary urged Japanese industrial companies to invest in America’s shipyards.

Under the law, Mr. Biden can take action to stop the acquisition only if the committee refers the matter to him and he finds “credible evidence” that the transaction “threatens to impair national security.” If Cfius refers this transaction to the White House, a presidential prohibition would signal that national security is whatever the president says it is, making Cfius a secretive, arbitrary and capricious tool for the party in power.

If that happens, global investors would be right to wonder whether America is open for business, while special interests would have gained a new lever of power and lobbyists a new cash cow. American allies would have another reason to worry about how special their relations with the U.S. really are. And the legitimacy of a vital national-security tool would be compromised.

Mr. Feddo served as assistant Treasury secretary for investment security, 2019-21. He is founder of The Rubicon Advisors LLC."