BANGKOK (AP) — U.S. President Joe Biden’s decision to reject a bid by Nippon Steel to acquire U.S. Steel on national security grounds is not the first time friction over trade and investment has hit the closest ally of Washington in Asia.
There has been a lot of fuss about trade in recent decades, and Secretary of State Anthony Blinken tried to smooth out ruffled feathers during a visit to Tokyo on Tuesday.
Nippon Steel CEO Eiji Hashimoto said Japan’s top steelmaker remains steadfast in its proposed $15 billion friendly takeover. Nippon Steel and US Steel have filed a federal lawsuit against the Biden administration’s decision.
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But the claim that the proposed deal could pose a threat to U.S. national security has stung.
Many in Japan see the decision as a betrayal by Washington after decades of American pressure to remove barriers to investment and trade. The timing doesn’t help, as Japanese companies are already bracing for potentially damaging tariff increases once President-elect Donald Trump takes office.
Japanese Prime Minister Shigeru Ishiba bluntly warned that spoiling the deal could hurt Japanese investment in the US
Here are some key issues at stake:
Make it fun
While in Tokyo for a farewell tour before Biden left office, Blinken told reporters he believes the alliance with Japan has become “stronger than ever before” over the past four years. Japan and the U.S. are mutually the largest investors in each other’s economies, he noted, “strengthening the foundation for years to come.” Japan’s Foreign Ministry said in a statement that the US Steel decision came up during Blinken’s meeting with Foreign Minister Takeshi Iwaya. But it said only that the two sides had “affirmed the importance of Japan-US economic ties, including investments in the US by Japanese companies.”
Harsh words
Before Blinken’s visit, Ishiba, who has struggled to build support and momentum since taking office in October, was emphatic.
“As to why national security was raised as an issue, it needs to be clearly explained. Otherwise, future discussions on this issue will come to nothing,” he said on Monday. “As much as we are an ally, I believe the points I have just made are extremely important for our future relationship.”
He said: “It is an unfortunate fact that Japanese industry has expressed concerns about future investment between the US and Japan. We have to take this very seriously.”
Japan’s Trade Minister Yoji Muto called the decision “very regrettable.” Headlines in Japanese newspapers focused mainly on Nippon Steel and US Steel’s plan to challenge the ruling in court.
US-Japan Alliance
Japan is the US’s largest and most important ally in Asia, a relationship forged during the US occupation following Japan’s defeat in World War II in 1945. Nearly 63,000 troops are stationed at dozens of facilities across the country and Washington has urged Japan to build up its own defense capabilities to counter China’s growing influence and military power.
Japan is counting on the US to provide a defense umbrella against its neighbors China, Russia and North Korea. Some critics are irritated by the decision to reject Nippon Steel’s bid for US Steel, saying Washington treated Japan the way China, a potential adversary, is acting.
“When is an ally not a partner? Apparently when a Japanese company wants to take over an iconic American company,” The Japan Times newspaper said in an editorial. It described national security concerns as “incomprehensible”, adding: “Trust has been seriously damaged and it is unclear what it will take to undo the damage.”
Track record in trading
Biden and Trump have both supported higher tariffs on steel and aluminum imports from China, saying they are needed to protect U.S. manufacturers from unfair trade practices and a flood of cheap imports. In 2018, Trump imposed 25% tariffs on Japanese steel imports on “national security” grounds. The Biden administration agreed to a deal in 2022 to import a certain quota of some steel products tariff-free. Anything above that amount is subject to the 25% rate.
The current trade frictions follow decades of negotiations that have led Japan to open its markets much more widely to foreign goods and services, transforming the retail industry from mainly old-fashioned department stores and small shops to outlet malls and large discount stores. Such “gai-atsu,” or foreign pressure, led Japanese automakers and other manufacturers to invest in American factories, creating hundreds of thousands of jobs. Nippon Steel and US Steel argue their deal would save American jobs, and business groups on both sides have objected to the deal’s failure as part of a broad shift in recent years away from greater openness.
