In today’s complex geopolitical landscape, businesses are increasingly at the intersection of international relations and economic interests. Historically, companies have played crucial roles in easing political tensions and fostering deeper ties between nations. However, as political sensitivities escalate—particularly where national security concerns overlap with economic objectives—businesses are facing greater scrutiny and challenges.
The proposed acquisition of US Steel by Nippon Steel, Japan’s largest steel producer and one of the world’s leading steel companies, exemplifies these modern complexities. Despite business leaders advocating for decisions grounded in economic and legal standards rather than political considerations, influential stakeholders—including labour unions and government officials, especially in pivotal US presidential election states—are shaping the outcome. This scenario mirrors earlier times when businesses served as stabilisers in international relations, notably before the intensification of tensions between the U.S. and China.
How businesses stabilised US-China relations — Once upon a time
Before tensions between the US and China heightened, businesses played a key role in building economic interdependence, fostering cultural exchange, acting as corporate diplomats, and integrating supply chains that tied both nations to a shared destiny.
Economic integration: Building interdependence
For decades, businesses from the US and China fostered mutual economic reliance. When China joined the World Trade Organisation (WTO) in December 2001, it opened up new avenues for American companies to enter China’s growing market.
Between 2001 and 2018, US exports to China grew by 527 per cent, from US$19 billion to US$120 billion, according to the Office of the United States Trade Representative. Meanwhile, Chinese manufacturers became essential to US supply chains, with imports increasing from US$102 billion in 2001 to US$540 billion in 2018.
A prime example is Apple Inc., whose relationship with China—particularly its partnership with Foxconn, also known as Hon Hai Precision Industry Co.—became central to its global success. As of 2020, Apple generated approximately 15 per cent of its revenue from Greater China, amounting to US$44 billion, as reported in Apple’s 2020 Annual Report. Foxconn employed over one million workers in China by 2019, contributing significantly to local employment and economic growth.
Similarly, Chinese companies like Lenovo, which acquired IBM’s personal computer division for US$1.75 billion in 2005, benefited from collaborations with US businesses. By 2013, Lenovo became the world’s largest PC vendor by unit sales, showcasing how Chinese manufacturing and American innovation could coexist for mutual benefit.
Cultural exchange: Enhancing mutual understanding
Brands acted as cultural bridges, facilitating mutual understanding between American and Chinese societies. American brands like Nike and Coca-Cola became symbols of modernity and Western culture in China. Nike entered the Chinese market in 1980 and, by 2021, reported revenue of US$8.3 billion from Greater China, accounting for 17 per cent of its total revenue. Coca-Cola, reintroduced in China in 1979 after a 30-year hiatus, now operates 45 bottling plants and employs over 50,000 people in the country.
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On the other hand, Chinese brands like Haier established a presence in the US by aligning their messaging with quality and innovation. Haier opened its first US manufacturing facility in South Carolina in 2000 and, in 2016, acquired GE Appliances for US$5.6 billion, preserving 6,000 American jobs. These cultural exchanges humanised both sides and demonstrated that cooperation could yield positive outcomes, providing a stabilising force.
Corporate diplomacy: Navigating political tensions
Businesses also acted as corporate diplomats, smoothing over political friction. During trade disputes, corporate leaders from both the U.S. and China stepped in to advocate for continued cooperation. The US-China Business Council (USCBC) represents over 200 American companies and facilitates dialogues to address concerns and promote mutual economic interests.
Companies like Walmart, the largest importer of Chinese goods in the US, played key roles in building strong trade relations. As of 2020, Walmart sourced approximately US$49 billion worth of goods from China annually. By providing affordable products to American consumers and supporting Chinese manufacturing, Walmart helped maintain a business environment where both countries benefited, even amid political conflicts.
Supply chain integration: Creating global systems of cooperation
US and Chinese companies, particularly in tech and manufacturing, became integral parts of a shared global supply chain. General Motors (GM) invested over US$16 billion in China and, by 2021, operated 11 joint ventures with local automakers like SAIC Motor. In 2020, GM sold more vehicles in China (2.9 million units) than in the US (2.5 million units), highlighting China’s significance to its global strategy.
Meanwhile, Chinese tech companies like Alibaba and Tencent integrated into global tech markets. Alibaba’s 2014 IPO on the New York Stock Exchange raised US$25 billion, the largest in history at that time. Tencent invested in US companies like Tesla, acquiring a five per cent stake worth US$1.78 billion in 2017, fostering cross-border technological collaboration.
These interwoven supply chains ensured that both nations had a vested interest in maintaining stability. If one side suffered, the other would too, making economic collaboration a buffer against political tensions.
The realist perspective: Can businesses truly stabilise geopolitics?
It is important to acknowledge the Realist school of thought in international relations, which argues that hard power—such as military strength and escalation dominance—is the primary stabilising force between states. Realists assert that states, driven by national interests and power competition, will ultimately prioritise hard power over economic cooperation when security concerns arise.
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However, soft power and hard power often work hand in hand in maintaining global stability. According to the Soft Power 30 index by Portland Communications in 2019, the US ranked first, highlighting its cultural and economic influence. China’s Belt and Road Initiative, with investments exceeding US$1 trillion across 138 countries by 2020, showcases its use of economic soft power. Clearly, both the US and China exhibit robust capacities for soft power.
While hard power addresses immediate security concerns and deters potential threats, soft power—including cultural influence, diplomacy, and economic interdependence—helps build long-term relationships, foster mutual trust, and promote cooperation. Together, they create a more balanced approach to international relations, where force and persuasion complement each other in achieving a less tenuous modus vivendi between states.
As seen in the period of economic integration between the U.S. and China, business-driven cooperation created mutual dependencies that helped temper geopolitical conflicts for years. For example, bilateral trade between the two countries reached US$659 billion in 2018, illustrating the depth of their economic ties.
Lessons for the Nippon Steel Deal
The challenges facing the proposed acquisition of U.S. Steel by Nippon Steel echo the tensions that emerged in U.S.-China relations. The Committee on Foreign Investment in the United States (CFIUS) would likely review such an acquisition, and political factors—including opposition from labor unions and electoral considerations—are influencing the process.
Nippon Steel, with revenues of approximately US$46 billion in fiscal year 2022, is a major player in the global steel industry. Acquiring US Steel, which reported revenues of US$12.2 billion in 2022 and employs over 23,000 people, could lead to significant technological advancements, capital investment, and potential job growth in the United States.
However, concerns over national security and domestic job protection could lead to political resistance. The U.S. steel industry is considered critical for national defence and infrastructure projects. Labor unions might fear job losses or changes in labor practices, while government officials could be wary of foreign ownership of key industrial assets.
In this context, business diplomacy is crucial. Nippon Steel can engage with U.S. stakeholders to emphasise the mutual benefits of the acquisition:
- Job preservation and creation: Commit to maintaining current employment levels and potentially creating new jobs through expansion and investment.
- Technological innovation: Invest in research and development to enhance steel production technologies, benefiting the US manufacturing sector.
- Economic growth: Contribute to local economies by investing in infrastructure and community development projects.
- Transparency and compliance: Ensure compliance with US regulations and maintain transparent operations to build trust with government entities and the public.
The business of upholding a rules-based order
As geopolitical challenges continue to evolve, the role of businesses and brands as stabilising forces remains essential. According to the World Trade Organisation, global trade reached US$22 trillion in 2021, underscoring the interconnectedness of economies. By fostering dialogue, promoting economic interdependence, and acting as mediators, companies can navigate political complexities and help maintain global cooperation in an increasingly interconnected world.
Their involvement not only benefits their own interests but also contributes to a more stable and collaborative international community. Historical precedents show that when businesses engage constructively across borders, they can mitigate tensions and promote mutual prosperity, even in the face of political headwinds.
In conclusion, while businesses alone may not completely stabilise geopolitical tensions, they have historically played significant roles as economic integrators, cultural ambassadors, corporate diplomats, and builders of global supply chains within a rules-based international order.
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