Blocking Nippon – Japan, friend or foe?

Editor's note: Keith Lamb, a special commentator on current affairs for CGTN, is a University of Oxford graduate with a Master of Science in Contemporary Chinese Studies. His primary research interests are China's international relations and "socialism with Chinese characteristics." The article reflects the author's opinions and not necessarily the views of CGTN.

On January 3, U.S. President Joe Biden blocked Japan's Nippon Steel from acquiring U.S. Steel in a $14.3 billion deal, citing national security concerns – sentiments also expressed by President-elect Donald Trump.

However, in a world where Japan is a close U.S. ally, cooperates to "counter China" through the Quad and promotes "friend-shoring" of industries, the blocking of Nippon Steel's acquisition signals a cautious U.S. approach to safeguarding strategic industries, even with trusted partners.

The bipartisan call to protect U.S. Steel claims to safeguard 14,000 American jobs, appealing to the left while ensuring key industries remain under U.S. control, satisfying the right.

That said, U.S. Steel, under the ownership of U.S. capital, has expressed a desire for a big payday and has warned that blocking the deal could lead to plant closures  and job losses, as its capacities lag behind global standards, causing inefficiencies.

At any rate, considering Biden's "open borders" stance, socialism for U.S. workers has been far from his priority. Meanwhile, billionaire capitalist Trump, with his "Make America Great Again" feud over H-1B visas, is fundamentally in dialectical opposition to workers' interests as well.

Thus, any talk about workers' rights serves to co-opt them into the class hegemony of both Biden's transnational capital and Trump's national capital interests. However, this division within Western capital becomes increasingly blurred, as evidenced by the blocking of Nippon's acquisition.

Notably, when it comes to defense, the U.S. Department of Defense (DoD) requires only 3 percent of domestically manufactured steel, none of which comes from U.S. Steel. The DoD instead sources higher-grade steel from abroad due to the industry's subpar capabilities – gaps that Nippon's investment aims to address by bringing technological upgrades to U.S. Steel.

Nippon's price to acquire U.S. Steel is steep, especially considering the company is hardly at the forefront of innovation. However, this is the price Nippon is willing to pay to gain access to the protectionist U.S. market. It has marketed the deal to U.S. workers by promising to maintain operations in Pennsylvania, U.S. Steel's home state.

Ideologically, Nippon is positioning the acquisition as a way to strengthen the "free world's" steel-making capacity, thereby supporting U.S. defense, with the added benefit of supporting military production.

With all these elements at play, what does this signal for U.S. hegemonism or Western capitalism? In the short term, the talk of protecting workers was a bid to secure votes and Biden's recent comments are moot as his departure looms. If industries are sold off, he or the Democrats could frame themselves as the "vanguard" of workers' rights, positioning themselves as defenders of the working class in the face of economic shifts. As such, if the deal goes bad, they can take the high ground despite fundamentally sharing the same class interests as Trump and the Republicans.

Trump, riding on a wave of working-class support, need not sabotage this yet by publicly backing the merger. If he eventually backs the capitalist interests behind Nippon and U.S. Steel, the bipartisan machine could spin it for the working class. If that fails, the U.S. process, with its competing interests, will be framed as democratic and fair. Trump could even pay lip service to the working class interests while covertly supporting the buy-out.

Aside from domestic issues, in terms of national defense, it is possible that the U.S. political class is acting in its overall hegemonic and strategic interests, disciplining both national and transnational capital (or certain Japanese sections of it). Once again, the democratic language of workers protection is "taken in vain."

It doesn't matter that Japan is essentially under U.S. occupation, was economically disciplined by the Plaza Accord, or that its military operates alongside U.S. forces because the U.S. lacks true allies or trusted partners. As a result, it won't share its benefits like market access, particularly with the Japanese, who used to rival U.S. economic hegemony, due to lingering distrust.

U.S. distrust of Japan ironically stems from the same aforementioned factors that keep Japan aligned with the U.S. For Japan's short-term benefit, these tensions must remain repressed, but they surface in actions like joining the Regional Comprehensive Economic Partnership (RCEP), which includes China and ASEAN.

Will Nippon's entry into the U.S. market be blocked forever? Only time will tell if the merger goes ahead. If it does, the U.S. (or U.S. capital) could permit Japanese investment to modernize its steel industry, only to reclaim it when deemed strategically necessary.

On the other hand, when it comes to capital investment, there could be unintended consequences. Parts of the U.S. political class envisioned subverting other countries through investment and they are now self projecting their own negativity onto Japan. Consequently, this political class perhaps needs more time to evaluate Japan's long-term intentions.

The Nippon-U.S. Steel merger sheds light on the complex dynamics of U.S.-Japan relations. Unlike the U.S.-Israel relationship, where transnational and national interests align closely, Japan occupies a more precarious position as a subordinate ally within the U.S.-led order.

While Japan remains a trusted partner in many areas, historical distrust and strategic concerns persist, framing Japan as both a partner and a potential rival. Whether the merger moves forward will depend on how the U.S. assesses Japan's long-term intentions and the strategic value of foreign investment in critical sectors.

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