Spoony Love's question on the Stock Market thread about the Japanese takeover of US Steel spurred this topic. The questions are:

1. Which companies or industries are so strategically important to the USA that we should not allow them to be taken over by foreign companies (or countries)?

2. If we do allow strategic companies to be acquired, which countries would you trust to be an acquirer?

Clearly, Anheuser Busch has already been acquired by the dang Belgians, so everything else is second place, at best.

For me on question 1: We have figured out that semiconductors are pretty key going forward, so it probably is clearcut that we need some onshore capabilities, especially since Taiwan (although a great ally) is not rock solid going forward. Aerospace is another, with planes, rockets, and defense capabilities being a clear-cut strategic need. Oil, steel, battery manufacturing? Not completely sure. Some form of auto industry - maybe? Not sure you can put Wall Street or being the world's financial hub in this category, but maybe it deserves consideration?

Question 2: I'd propose that our top political and strategic allies include Great Britain, Canada, Japan, Australia, Israel, and maybe Germany and France. Scandinavian countries could be included, but I'd put Italy and Spain a notch lower. Mexico is a curious frenemy situation. I hope that someday countries like India, Argentina, Brazil, Turkey, and even South Africa could make the list, but we're far from that right now.

I'd probably be comfortable with Nippon Steel acquiring US Steel, mainly because of the trustworthiness of Japan. We still have other (better?) steel companies in the mix, so US Steel isn't as critical as it once was.

Thoughts?

Beer

Besides the obvious gas and natural gas production and resulting gasoline, diesel, and jet fuel products - we should definitely see ethylene production as a priority.

To a slightly lesser extent, certain ethylene derived chemicals (ie, certain plastics like polyethylene and polypropylene, as well as many others).

There are Canadian and European companies in this space. However, any EP-based company will be swayed by EP politics.

Pipelines, underground storage and refineries.

Everything that produces molecules used for energy or plastics. Uranium, silver, and rare earths mining (oh snap, the Clintons sold that to China)

rare earth metals mining

Some very good additions above.

Any thoughts on question #2, foreign acquirers' domicile countries? I'd like to hear who you totally trust, who's next, and who's absolutely OUT, in your mind...

From a large, global company's perspective, I don't think any country can be out (except for places like Venezuela, Iran, North Korea, and Cuba). Bottom line is American companies need international cash, especially for capital investments.

But where they can get creative is with partnerships and joint ventures, with foreign interests having minority ownership. There is a large construction project in the chemicals space on the Gulf Coast that is a JV with a Middle Eastern country. These types of arrangements are fairly common in the chemicals industry.

Shipping and shipbuilding should be way more important than it is.

Literally just read a great article about his... I had no idea it was so bad (and that it has been bad for decades)

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Studies in the early 2000s noted that American shipbuilding productivity was improving over time, with labor productivity increasing by roughly 30% between the early 1990s and the early 2000s. Unfortunately, foreign shipyard productivity was increasing as fast or faster, leaving the U.S.'s relative position as an uncompetitive shipbuilder unchanged. In the early 1970s, the U.S. produced 3% of commercial shipping tonnage. By 1988 that had fallen to 1.1%, and by 1999 it had reached 0.25%.

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"Insignificant fraction"

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The U.S. continues to produce an insignificant fraction of commercial ships, and the shipbuilding industry it does have is propped up by some of the most restrictive protectionist laws in the world. American ship costs and construction times are far higher than those around the world, and markets that once provided a healthy amount of work for shipbuilders (such as inland and coastal trade) have greatly declined. The number of active shipyards has continued to fall, and the yards that do exist mostly do either naval work or build vessels to support offshore oil drilling.

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All the world's large ships are now made in Asia:


https://www.noahpinion.blog/p/why-cant-the-us-build-ships?utm_source=pocket-newtab-en-us

It's incredibly sad that as a nation hellbent on consumption of global goods, we essentially rely 100% on other countries to transport those goods because of national stupidity. I've spent enough times in US shipyards to have a first hand experience with how bad they can be as well.

The oldest most ships giving off the most emissions are ironically in the UsA.

aggiebq03+ said:

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Farmland and food production

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Everything else is a distant second to this.

This is the number one reason why it is so hard to compare modern economies to those before the industrial revolution. Calculating inflation and how the price of goods compare now to back then are severely skewed by the amount of effort (or lack of effort these days) to produce food.

Then the importance of our country having sole control of our food supply and not being at the mercy of trade deals for another country's food is nearly incalculable.

Time for me to weigh in again:

I am viewing this issue as primarily goods or service where we are highly dependent on imports. If we already produce enough ourselves for now and into the future, I don't think there's an issue. Therefore, farmland and pipelines don't worry me at all, as the physical assets are within our borders. If the stuff truly hits the fan, I think we could repatriate any Chinese/bad actor farmland and other assets. I even struggled with putting oil & gas on this list, as we are currently self-sufficient, and are likely going to be so for the foreseeable future. It seems like we're in pretty much the best place on the planet for drug research and medicine, but manufacturing pharmaceuticals might be a weakness.

I'm much more concerned with semiconductors, rare earth / uranium and other scarce minerals. The shipbuilding post from Apache was also eye-opening - seems like we should at least retain a basic capability there.

As to trading partners, I philosophically am in alignment with what TXTransplant says - - and despite both political parties currently becoming majorly protectionist, I think the long run best case for Americans is to continue to foster global free trade wherever possible, and only back off this stance when there is blatant subsidizing or protectionism from others.

I'll post my thoughts, from a CHEN person who works in the industrial production/design side.

I think the US needs to move to a more electricified production methods. While HC are satisified, I think we should move from burning them for primary movement (gasoline in cars). This can do 2 things: gives us a chance to trade these globally and use them for higher value products. As mentioned before, plastics and other 'fine' chemicals are produced, but maybe not 100% domestically. We can shift some of the gasoline to making those products. But with some of the oil production vs. refining, there are gaps. Mostly because refiners tend to be slow to change their refinery unless they know they have a stable, long term supply of a specific crude type.

The other issue I see that would allow many of the industries BACK to the US is pollution controls/improvement. I worked for a start-up making cathodic materials for 18 months. The major issue? Waste water. The same applies to: rare earth mining/refinement, drug productions, other 'heavy' industries. Also to semiconductor production as well. Why? Here's an example.

To make high nickel cathode materials (and pretty much any Li-Ion cathode material), you starte with sulfated metal powders. Take pure metal, react sulfuric acid and dehydrate. You take the metals, dissolve in water and now you react that. The left over is ~4-5% (40 to 50,000 ppm) 'salt' water. Ocean water is 3.5%. So to discharge that to current limits, you either need a BOATLOAD of freshwater or a lot of energy to evaporate it and harvest the solids. And depending on the salts/chemicals you use in production, you might be able to sell the waste water, but more than likely, much like fracking, you just pump it down the hole. For places in which energy is "cheap", but water "expensive"? You recapture the water (think Middle East). For places where it is reversed, you dump it. So with China, they can dump the sulfated water or it 'runs off' during rains and now their disposal costs go to zero. Makes the economics SUPER easy and nice.

This same example applies to drugs and other fine chemicals. An old graphic (can't find now, but in text form) is that refineries make 1MM units and produce 1 unit of pollution. For drugs, they produce 1 unit of drugs and 1MM of polluted 'stuff'. If I can push the disposal costs to zero, my profit goes up; hence why moving to India is great (or China).

So if the US can improve/expand these technologies, this is a 2-for-1 deal. We can bring 'dirty' things back to the US and then also export the technology to the EU, Africa and others.

Just something that needs attention, IMHO, that would help on making the US more 'self-reliant' on base industries.

~egon

I totally get your perspective, and I think industries that have already been outsourced would be the top property.

I gave my thoughts from the position of, if we don't value certain industries/products being made here in the US, then it becomes too easy to put excessive restrictions on said industries that force them to move overseas.

For example, carbon emissions. If we make it too onerous and expensive to produce ethylene and plastics here, it will move overseas (where we have zero control over any environmental impact).

Same applies to oil/nat gas and gasoline/fuel production.

We need to protect those industries.

TXTransplant said:

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I totally get your perspective, and I think insisting that have already been outsourced would be the top property.

• I'm not sure what you're saying, here. You talking about on-shoring priorities and incentives?

I gave my thoughts from the position of, if we don't value certain industries/products being made here in the US, then it becomes too easy to put excessive restrictions on said industries that force them to move overseas.

• No argument from me - I'm a free market guy.

For example, carbon emissions. If we make it too onerous and expensive to produce ethylene and plastics here, it will move overseas (where we have zero control over any environmental impact).

• Agree, to a point. I'm in favor of incremental environmental progress, and might even be convinced this is an area where the public good can justify some government incentives.

Same applies to oil/nat gas and gasoline/fuel production.

We need to protect those industries.

• I have a VERY high bar with regard to "protecting" business. I don't believe in corporate welfare -- we need to ensure a level playing field for participants (government CANNOT get into actively picking winners and losers, IMHO). Once the hurdle is met for "strategic importance", then the array of options should be available, including investment credits, tax relief, and very limited tariffs.

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I think I had a wayward autocorrect in the first part of the last post I made.

It's been long enough that I don't know what word I meant to use, but insisting wasn't it. I think it was industries. Basically, by point was bringing back industries that have moved overseas would be a higher priority than protecting the ones that are still here. But we want to also keep the ones that are here from leaving. I edited my post to make it clearer.

And by "protecting", I by no means am suggesting corporate welfare.

However, as a county (people and government), we need to recognize the value these industries bring to our economy. And our government should not be making it more difficult for them to operate here. Because all that means is the industry will move to another country - making us even more dependent and putting $ in the banks of counties who may not be our political allies.

Dr. Doctor makes a good point about bringing "dirty" industries back. The US is the best country to make "dirty" industries less dirty. We won't ever eliminate pollution, but we do hold ourselves accountable. The unintended consequence of outsourcing to China, India, Indonesia, etc, is dirty often gets dirtier. They are in no way willing to be held accountable for the messes they make. So, if we want to in any way affect pollution, we have to get over this NIMBY attitude and accept that no pollution, no emissions, and "clean" are pipe dreams.

At the start of Covid, there was an article detailing the disturbing fact that no antibiotics or vaccines are manufactured in the US. Insane.

AGROAg88 said:

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At the start of Covid, there was an article detailing the disturbing fact that no antibiotics or vaccines are manufactured in the US. Insane.

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Source? I know the trends have been toward offshoring due to cost factors and litigation/regulation risk, but I find it hard to believe it's zero. Either way, if this is close to true, I could easily put this in the strategically important category.

By the way, my ancillary intent behind this thread is to uncover (for myself) the industries for which tariffs could be justified. My position is that there are very few, but this is trying to help identify what they actually are.

Apache said:

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Drugs/Vaccines/Medicine/Medical Supply

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Hasn't that ship sailed?

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Hasn't that ship sailed?

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The ship has sailed, but like anything it can be remedied.
We should at least have strategic capability to produce the drugs during emergency & not rely on another country (who will of course take care of their own citizenry first)
A stockpile of critical medical supplies should also be kept on hand, much like the strategic petroleum reserve.

I think the answer lies in what the meaning of "so strategically important" is?

Does it mean self reliant internally and able to defend the homeland and its people in a world war type event, or is it something else?

I also think you can't ignore that some American industry leaders / moguls and higher level politicians don't necessarily share the goal of American self reliance nor the goal of America as a world leader . This has been the case for awhile but I feel like Covid made it more noticeable. Too many imo buy into the whole world government concept and the giant corporate/political marriage that seems to accompany it.

halfastros81 said:

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I think the answer lies in what the meaning of "so strategically important" is?

Does it mean self reliant internally and able to defend the homeland and its people in a world war type event, or is it something else?

I also think you can't ignore that some American industry leaders / moguls and higher level politicians don't necessarily share the goal of American self reliance nor the goal of America as a world leader . This has been the case for awhile but I feel like Covid made it more noticeable. Too many imo buy into the whole world government concept and the giant corporate/political marriage that seems to accompany it.

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To me, an avid free-marketer, I put the American consumer first, and insist on providing them the lowest cost for the products they want and need wherever possible (NOTE: This is in no way a call for world government). That said, I think there are a few exceptions where a production capability is strategically important enough that the government should get involved in either protecting domestic producers, subsidizing them, or putting a tariff on imports from elsewhere. As I have stated, this should be as small a list as possible, and only for items truly needed to ensure our future security.

The other factor I haven't mentioned is protecting intellectual capital. I tend to treat this as a given, but there are bad actors (CHINA!) out there who will stop at nothing to obtain it from us by less-than-legal means. I think this is a much more important strategy to employ than enacting tariffs. Tough to prove, but if it's proven, put a stop to it, AND layer on punitive tariffs, IMHO.

So free flow of critical goods at market pricing . In that case I feel that the lion's share of oil and natural gas ( production and refining ), steel, shipbuilding , pharma, military aircraft, semiconductor chips, transport trucks, and food and fertilizer production must be established and maintained stateside. Where the hq's of the companies that run these industries is may not be all that important in some cases and is in others and I think the split is based on if the end products are engineered /manufactured as opposed to commodities . Even if the ownership of a commodity producer (steel, oil) is foreign and unfriendly the assets can still be forced to sell or seized in an emergency . Other industries would be more subject to critical planning and espionage concerns and we need to be sure the management was aligned with the interests of America and Americans.

I need to cogitate on this some more but those are my initial thoughts .