US Steel and 7-Eleven: Examples of Protectionism with Diverging Goals
A 7-Eleven in Sihui Station North Square in Beijing, China
Credit: Wikimedia Commons
The saga of the Japanese corporation Nippon Steel’s acquisition of US Steel has almost come to an end after its two year journey. With the rise of economic nationalism, populism, and protectionism, as well as the broad application of national security in a multitude of fields in America, the deal has become near impossible to salvage from its original takeover idea. While Nippon Steel fights the US Government in the courts, it may be useful to look at another merger with similar claims of national security, that being the acquisition of Japan’s 7-Eleven by the Canadian Alimentation Couche-Tard. Both deals, while similarly crucial to the American and Japanese governments respectively, have their differences when it comes to security and economic interests. Nevertheless, these differences should not take away from the fact that US Steel and 7-Eleven are considered a national security interest and core industry respectively by their home governments.
Nippon Steel’s attempted acquisition of US Steel has been fraught with tensions since it was revealed. In the US, the rust belt, comprised of states spanning from Pennsylvania to Illinois, is considered a key electoral area for any presidential candidate. If the deal were to go through, many unions would turn away from whomever either approved of the deal or did nothing to stop it. Going against the deal helps to protect the industries that constituents depend upon for their jobs, hence the name protectionism. On top of this, steel has been seen as a critical resource for at least the past two centuries, with nations basing their economic plans on steel production facilities. Steel is used for a multitude of military projects, such as shipbuilding, small arms production, and logistics support. These two main concerns, electoral backlash and production chain security, help to emphasize the importance which the US places on domestic control of the last bastion of locally produced steel as well as show the reasoning behind the US’ decision to block the takeover.
The story of 7-Eleven's acquisition by Alimentation Couche-Tard is more complex originating from its outsized importance in the Japanese service-based economy. Traditionally, a core industry designation has been awarded by the Japanese government to companies which apply for the designation on the basis of a national security risk, such as in the fields of energy and military technology which 7-Eleven is not a part of. While not unprecedented, it is an odd choice to make 7-Eleven a core industry despite its lack of key technologies, critical resources, or other important national security items, leading to speculation as to other reasons that the designation was made. There are debates over whether this is a reaction to Alimentation Couche-Tard's low takeover price per share rather than a traditional field which would be awarded the designation by the Finance Ministry. Nevertheless, as a core industry, 7-Eleven's takeover will be delayed due to a mandatory national security review of Alimentation Couche-Tard.
Comparing these two attempted acquisitions shows the differences between Japanese and American protectionism, and how each can be detrimental in their own ways. While the protectionism surrounding the takeover of US Steel has halted the deal and resulted in litigation which will drain American and Japanese resources and harm US-Japan relations, the protectionism surrounding the takeover of 7-Eleven will only be a small hurdle which will not harm Canada-Japan relations or drain the resources of either nation to the same degree. While both takeovers have underlying claims of national security, they both are crucially different in these regards, but the US Steel takeover being blocked will have outsized economic impacts.
Japan has been called “evil” by a US CEO, while others like US President Joe Biden have stated the need to ‘level the playing field’ in regard to Nippon Steel, showing that the animosity directed towards the corporation seems to not only be economical, but showing a resurgence of past trade disputes that nearly fractured the US-Japan Alliance. Even with the strength of the alliance persevering in the past, and even more reason for it to now with a multitude of shared issues between the two nations, trade issues have the unique opportunity to form cracks within the sturdy foundation on which the alliance was built. Compared with the takeover of 7-Eleven, there have been no indications of trade disputes or comments by executive level leaders to alter the deal, or any tensions between the business communities of the two nations.
These two takeovers show the flaws of the US’ version of protectionism, as well as the value of Japan’s own. From a national security perspective, the US’ act fails to secure both the production of steel domestically and to truly protect the nation from harmful actors. First, this decision promotes an unproductive industry that will eventually become unprofitable and jeopardize national security, despite the White House claiming that it would secure steel production, thereby protecting national security. Second, it harms the alliance with Japan, which could become another issue where US interests in Asia are put in a precarious situation. Again, on the other hand, the takeover of 7-Eleven ensures any issues relating to national security are dealt with before the transaction, while also ensuring good relations between the two nations and ensuring economic prosperity and trade continuity. While the US may believe that its decision to block the takeover of US Steel by Nippon Steel will protect a crucial US industry, it may want to take a page out of Japan’s own book on protecting national security while also promoting national security, rather than promoting protectionist ideology.