Steel

Marco Rubio: U.S. Steel Sale Is Bad News for National Security

In 1901, J. P. Morgan formed U.S. Steel from Andrew Carnegie’s Carnegie Steel Company. It was an immediate corporate powerhouse, the product of two great American businessmen: the king of Wall Street and the rags-to-riches immigrant-industrialist. And it swiftly became the largest steel producer in the world.

Fast forward a hundred years, and things look very different. The United States’ share of global steel production has shriveled, as the governments of various countries have intervened to export underpriced materials. U.S. Steel in particular has fallen from first place to 27th in international rankings of productivity. More importantly, it is no longer “U.S.” Steel. Just a few days before Christmas, the company was auctioned off by its board of directors to the highest bidder, which in this case was a Japanese firm, Nippon Steel.

It’s hard to think of a more poignant metaphor for the deindustrialization of America. But the sale of U.S. Steel isn’t just symbolic. It also presents real danger to our long-term economic and national security—danger enough that Senators J. D. Vance (R-Ohio), Josh Hawley (R-Mo.), and I have requested that the Committee on Foreign Investment in the United States (CFIUS) block the acquisition, a request belatedly echoed by the Biden administration.

Some of our fellow conservatives scoff at our concerns. They note that Japan is a close ally to the United States. What objection could one possibly have to allowing a friend to control one of our most important steel companies?

Of course it is true that Japan is an ally. Our friendship with Tokyo is beyond dispute and essential as we confront the threat of communist China together. But even the best of friends don’t see eye to eye on everything—to argue otherwise in the dangerous realm of national security would be foolish. It is common sense that there are some things you shouldn’t entrust to others when you can do them yourself. Managing America’s steel factories, which manufacture the fundamental building blocks of modern civilization, is one of those things. It’s no insult to Japan to say so.

Other critics argue that U.S. Steel is of little consequence to our national security. The editors of National Review write, “Even if U.S. Steel totally disappeared, the U.S. would still have production capacity to meet defense needs.” They cite former secretary of defense Jim Mattis, who estimated the military to require only three percent of domestic steel production to function.

U.S. Steel mill
This picture taken on July 29, 2019 shows the US Steel Kosice steel-mill in Kosice, eastern Slovakia. – The United States Steel Corporation’s Slovakian unit which is one of Slovakia’s biggest employers recently announced cuts of 2500 jobs by the end of 2021.
VLADIMIR SIMICEK / AFP/Getty Images

It is strange to see defense hawks argue for the adequacy of the U.S. defense industrial base––and forget that defense needs increase dramatically when a nation switches from peace to a war footing. During World War II, for example, the U.S. government devoured roughly 60 percent of domestic steel, and that was with much greater production numbers than those of today. If we were to return to a conflict of that magnitude, the Department of Commerce is certain that “existing domestic steel production capacity would be unable to meet national security requirements.”

And conflict is not hypothetical. Consolidation pushed by the Clinton administration has atrophied our defense industrial base to the point where the “arsenal of democracy” is now struggling to aid allies in two international wars, even though the United States is not a direct participant in either of them. Any number of further conflicts could arise in the years to come, including with communist China. God forbid that we should be forced to fight protracted battles with modern industrial enemies—but are we prepared for that contingency?

Right now, the answer is clearly no. To change course, we must abandon the “short-termism” and naïve globalism so prevalent on both Left and Right. Far too many seem to think that immediate profits matter, while long-term strength and sovereignty do not. But there is a difference between tending to the present and forgetting about the future, just as there is a difference between domestic and foreign companies.

Congress has long recognized this fact. It’s why both Democrats and Republicans worked together under President Ronald Reagan to empower CFIUS to reject foreign acquisitions of U.S. companies that threaten national security. But CFIUS has been missing in action in recent years. In 2008, for instance, Reuters reported that Russia had acquired nearly 10 percent of American steel production—and that CFIUS had done nothing to stop it. Many of those factories and steelyards ended up getting liquidated. If we’re going to keep our defense industrial base strong, we need CFIUS to do its job.

We also need a broader understanding of national security. Today, few policymakers would dispute the need to fortify our critical supply chains. But most are happy to hide behind the Biden administration’s “small yard, high fence” formulation, which claims only cutting-edge technologies are worthy of federal protection. In reality, we need much broader safeguards. As COVID-19 revealed, depending on foreign companies for everything from medicine to missiles may not seem dangerous in peacetime, but in a time of crisis, it can throw the whole country off balance.

The time has come to take basic sectors like steel as seriously as microchip manufacturing, artificial intelligence, and other buzz-worthy industries. In a time of major conflict, we will need American steel—and lots of it—to remain free.

Marco Rubio, a Republican, is the senior U.S. senator from Florida.

The views expressed in this article are the writer’s own.