STEVE INSKEEP, HOST:
In about a week, a special government panel is supposed to give President Biden an opinion of the purchase of U.S. Steel. Japan's biggest steelmaker, Nippon Steel, has been trying since last year to buy its ailing American counterpart for nearly $15 billion. As we learned this year when we visited one of the towns where a U.S. Steel plant is, many American steelworkers support the takeover to save their jobs. But both President Biden and President-elect Trump oppose it. So is there a larger trend here, the United States growing more skeptical of foreign investment? David Wessel has been asking that question. He leads the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution. David, welcome back.
DAVID WESSEL: Good morning, Steve.
INSKEEP: Let's start with the U.S. Steel purchase here. How would it be that a Japanese firm, an ally of the United States, buying U.S. Steel would pose a national security risk?
WESSEL: Well, that's a great question. And, in fact, several of President Biden's advisers - according to the Financial Times, the State Department, the Pentagon and the Treasury - say it's not a national security risk. But this Committee on Foreign Investment in the United States can't agree on that, and that so far they've been able to cut a deal with Nippon Steel which they think would protect the national security of the United States.
This is basically politics. Economically, this deal makes a lot of sense. U.S. Steel is falling behind its foreign competitors. Nippon Steel has promised to invest in the U.S. It would catapult the combined company into the second or third ranks of global steel companies, providing a counterweight to Japanese - I mean, a counterweight to the Chinese steelmakers. But the steelworkers union - not all its members, but the union - is opposed to this. This became a campaign issue in part because it employs a lot of people in Pennsylvania, but I think more it became a symbol. Somehow it struck both President Biden and President-elect Trump as somehow unpatriotic to let the Japanese buy an American icon like this.
INSKEEP: Yeah, it seemed to have something to do with the name - United States Steel. But let's ask if the symbolism points to broader substance. Is the United States becoming more skeptical of foreign direct investment?
WESSEL: Well, you can see Nippon Steel as an outlier. But if this deal is blocked on national security grounds, it will stretch the definition of what's national security. The U.S. remains the world's top destination for foreign direct investment. That's when foreign companies either buy U.S. companies or build plants here. But the flow has been trending down over the past several years. It's half the pace of the 10-year average. Part of that is a global phenomenon, but we are getting more skeptical.
We like it when German automakers build cars here or Taiwanese chipmakers make chips here. But President Trump's tariff plan is intended to force manufacturers to make stuff in the U.S., and he favors U.S. manufacturers. There's growing resistance to foreigners buying real estate in the U.S. It's accused. They're accused of driving up housing courses - housing costs. And, of course, Chinese investment in the United States has become very controversial. President-elect Trump said on the campaign trail he'd block any new U.S. purchases of farmland by the Chinese. And the Treasury has recently finalized rules aimed at preventing foreign purchases of land around military bases. So I think it is part of a generalized skepticism about globalization.
INSKEEP: Well, the other question is, is there skepticism in the other direction? Are Americans growing more skeptical of sending their own money to invest in other countries?
WESSEL: Absolutely. It's a big change. The Treasury recently finalized the first-ever rules - that take effect in January - that will block or discourage American venture capital firms and corporations from investing in China in sensitive technologies like chip manufacturing, AI and stuff like that. So that is the biggest change on the horizon right now.
INSKEEP: David, thanks for the insights. Always appreciate hearing from you.
WESSEL: You're welcome.
INSKEEP: David Wessel of Brookings. Transcript provided by NPR, Copyright NPR.
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