With US Steel Comments, Biden Shows What a Foreign Policy for the Middle Class Looks Like

April 3, 2024

President Biden caused an uproar last month when he stated that US Steel should remain “domestically owned and operated,” after the Japanese company Nippon Steel proposed to buy the former. One observer called it “a threat to economic liberty.” Another said it was “way out of proportion” to the number of steelworker jobs. And another proclaimed it “unprecedented for a president to make a substantive comment on a case that is pending before [CFIUS]”—that is, the Committee on Foreign Investment in the US, which is reviewing the merger.

But Biden’s action should not have been a surprise. After all, he was the first US president to walk a picket line (with autoworkers) last fall, upsetting the norm that heads of state stay neutral or even pro-management when it comes to labor disputes. In this case, it was the United Steelworkers (USW) that demanded solidarity, after alleging numerous contract violations and questionable actions from both US Steel and Nippon. Steel company Cleveland-Cliffs and Senator Sherrod Brown (D-OH), both close to the union, have also called the deal a mistake. And Biden didn’t disappoint. “It is important that we maintain strong American steel companies powered by American steel workers,” he said.

The big difference between the auto and steel cases was that the latter involved commercial diplomacy with a US ally, and Biden asserted national security concerns with the Japan-headquartered Nippon taking over an iconic American asset. One columnist called this “economic nationalism . . . out of place with the respect [Biden] purports to show for American allies.” Former Japanese officials also expressed surprise, saying, “We thought we’re completely aligned countries.”

Yet the writing was on the wall, for anyone willing to look. Biden’s top national security advisor, Jake Sullivan, has written at length about the idea of a foreign policy for the middle class. This philosophy notes that so-called “neoliberalism”—which leaves it to elite market actors to decide where and how production happens—has hurt US workers. By ignoring rising inequality and environmental degradation, neoliberal foreign policy was on shaky footing that only a more well-rounded industrial policy can address. When faced with a choice between upsetting labor or potentially upsetting an ally, the working class needs to win—at least some of the time. (In any case, Biden’s announcement does not seem to have caused insurmountable problems with Japan. Just days later, the Financial Times reported the two countries are planning “the biggest upgrade to their security pact in 60 years.”)

As it happens, the decision to side with labor in this case is not just good politics; it’s also good policy. As finance has become ever more detached from the real economy and the fate of any given town or nation, labor unions have started to fill the void. USW’s current contract with US Steel requires ongoing capital investments in domestic facilities, 60 days’ notice for major acquisitions, and “the earliest practicable notification” of buyout offers so that the union can organize a counterbid. In this case, Nippon announced the deal before consulting with the union. This pattern is ongoing as of April 2, with the company leaking union communications instead of waiting for their response.

Moreover, when unfair trade practices in China or other disruptions hurt steel markets, the union reasonably questioned whether a Japanese company would ever idle its home country operations before it idled its US operations, and whether it would use its newfound control over US Steel’s iron ore assets to privilege its overseas factories. Additionally, Senators Brown, JD Vance (R-OH), and Bob Casey (D-PA) have raised concerns about Nippon’s ties with Chinese producers, which have undercut US producers in recent years. Not for nothing, ensuring continuity of domestic sources, supply chains, and workforce is squarely within the CFIUS mandate.

There were also climate concerns. Nippon is a laggard when it comes to decarbonizing steel. In contrast, Cleveland-Cliffs, which had organized its own bid for US Steel, is among the companies partnering with the US Department of Energy to make investments to clean up air quality, including Monday’s announcement of new projects in Middletown, Ohio. Projects like this give the US a fighting chance to keep up with green steel leaders like Sweden.

How exactly this merger proposal will play out remains unclear. But if the controversy causes global companies to realize that doing business in the US requires honoring workers and communities, then the idea of foreign policy for a middle class will be closer to reality.