Hanwha and Nippon Deals Are Good for Pennsylvania

There’s so much bad news that it’s sometimes hard to spot the good news. But here’s some: An economic and strategic win-win between the United States and South Korea, injecting capital, jobs, and tech knowhow into eastern Pennsylvania. Yes, that’s good news. And we can have more win-wins, if we want them.

Hanwha buys the Philly Shipyard

But first, the good news – points already scored on the board:

According tothe Philadelphia Inquirer, Hanwha, an industrial conglomerate based in South Korea, will pay $100 million to acquire the Philly Shipyard. The site, once known as the Philadelphia Naval Shipyard, commenced operations in 1776, producing battleships and other ships for more than two centuries. During World War II, the shipyard employed 40,000. Yet as with so many American industrial plants, it fell upon hard times after the war; it closed as a federal facility in 1996.

Sadly, the whole U.S. shipbuilding industry, both military and commercial, has shrunk dramatically in recent decades – and that’s a genuine national security threat.

But now, Hanwha has come to Philadelphia, cash in hand. “We look forward to leveraging our shipbuilding and manufacturing knowhow in continuing the success of Philly Shipyard,” said one Hanwha official. Another executive added, the company will use the yard for “state-of-the-art naval systems.”

That’s a lot of sensitive technology. Is Uncle Sam okay with this cooperation? Indeed, he is, South Korea being a trusted ally, and close military partner, for the last seven decades.

The U.S. Secretary of the Navy, Carlos Del Toro, who helped negotiate the deal, praised it as “a game changer … this will bring good-paying union jobs to Philadelphia.” He added, “I could not be more excited to welcome Hanwha as the first Korean shipbuilder to come to American shores – and I am certain they will not be the last.”

More investment in Pennsylvania

In fact, another South Korean industrial company, Hyundai, signed its own deal with the Philly Shipyard in April. All this investment, Del Toro predicts, “will change the competitive U.S. shipbuilding landscape.”

So, there’s solid reason to be hopeful that the capital of an Asian ally will help foster an economic boom in eastern Pennsylvania. But what about the other end of the Keystone State, western Pennsylvania? Are there win-wins to be had there? The answer is yes, but there’s been a hitch.

In December, a Japanese company, Nippon Steel, announced its hopeful plan to buy Pittsburgh-based U.S. Steel. That’s another obvious win-win: an infusion of Japanese capital, keeping productive American workers doing what they do best: making steel. Interestingly, the Nippon deal is actually much larger than the Hanwha deal; the Japanese company wants to invest a whopping $15 billion.

Yet the Nippon purchase has hit some obstacles. Critics worry that the “iconic” U.S. Steel brand will somehow be diluted, and President Joe Biden declared that “it is vital for it to remain an American steel company that is domestically owned and operated.” In fact, Nippon has pledged to keep the company, and its name, in Pittsburgh, and to protect steelworker jobs. Yet the critics haven’t budged; it’s possible they could block the deal altogether.

America needs the steel

Just on July 30, Gov. Josh Shapiro said he has “serious concerns about the deal that has been put forth.” One senses, in those words, room for some tough bargaining ahead. Yet it’s possible, of course, that the deal could be blocked altogether.

If the deal were blocked, that would leave America in the strange position of green-lighting a relatively small, but very high tech, deal in Philadelphia, while red-lighting a huge, but relatively low-tech, deal in Pittsburgh. To be sure, steel is a vital national security component, but it’s more of a commodity. What matters most is the ability to produce a lot of steel, for everything from ships to structures to shells.

So that’s why it’s ominous that our steel-making capacity has fallen so far behind China. Today, the U.S. produces only a tenth as much steel as our main military competitor.

Nippon’s investment could be a huge boost to American steel, providing the capital, and the corporate synergies, needed to produce more steel on the home front. But is there any security risk? The Heritage Foundation’s Joel Griffith doesn’t think so: “Simply put: Nippon’s acquisition of U.S. Steel does not present a national security threat.”

The Hanwha deal is unabashed good news. The Nippon deal could be more good news, if we let it happen. And we need more good news.

This article was originally published by RealClearPennsylvania and made available via RealClearWire.