When Japan’s industrial titan Nippon Steel sought to acquire U.S. Steel late last year, it set off a chorus of American opposition.
Union leaders and lawmakers railed against the deal in language reminiscent of the U.S.-Japan trade wars of the 1980s and 1990s. President Biden — nodding to swing state votes in steel country — said U.S. Steel must remain “domestically owned and operated.”
Leave aside the election year politics — and how it tests the ability of an American company to pursue what it sees as the most logical strategy for itself. The bid reflects Japan’s rise to the largest foreign investor in American businesses. And this investment surge is unlike those of years past when Tokyo’s overseas expansion was part of its rising economic clout. Today, the opposite is true.
Japan’s relentless population decline is causing its market to shrink. So Japanese companies are turning to the U.S. for growth, thereby setting a precedent for other foreign companies facing similar demographic challenges in their home markets.
It is a precedent Washington policymakers would do well to note. The Nippon Steel bid illustrates how, in the coming years, more foreign companies with declining populations are going to seek to invest in the U.S.
This is a trend the U.S. should welcome and seek to leverage while making sure investments come from trusted allies, not from strategic rivals, including China, to avoid leakage of technology.
Foreign investments — particularly those in manufacturing — create both jobs and fresh opportunities for local businesses. Rural areas such as midwestern factory towns will be beneficiaries.
Allied investments bring capital and innovation that allow the U.S. to better compete against China. The Biden administration, through “friendshoring,” is already working with allies and likeminded nations to strengthen and secure supply chains for critical products. That strategy should include embracing U.S.-bound investments from those same close allies, starting with Japan.
Big beneficiaries of this approach will be American workers, especially those without college degrees, who tend to gain from good manufacturing jobs.
