Senate Ag Committee Chairwoman Debbie Stabenow, D-Mich., Wednesday questioned a panel of experts on the pending purchase of Smithfield Foods by a Chinese-owned food processor, Shuanghui International.
Stabenow called the hearing to evaluate the size of the takeover, effects on food security and safety and the process used by the U.S. to evaluate the effects of foreign acquisitions. The takeover represents the largest purchase of a U.S. company by a Chinese firm in history.
Hearing participants included Larry Pope, Smithfield Foods President and CEO; Matthew Slaughter, Dartmouth College; Dr. Usha Haley, West Virginia University Robbins Center for Global Business and Strategy; and Daniel Slane, Commissioner, U.S.-China Economic and Security Review Commission, U.S. Chamber of Commerce.
In opening statements, Sen. Stabenow noted that a "long-term view" of the proposed purchase of Smithfield Foods should be considered.
"Despite the strength of America's pork sector, Smithfield has been struggling to make a profit -- and yet Shuanghui is offering to pay a 30% premium for the company. That, to me, raises questions about the economic motivations of the purchase," Stabenow said.
Lawmakers have given the economic plans and the trade policies of the Chinese a hard look ahead of the merger, discrediting Smithfield's position that the merger will boost the American pork sector due to a growing demand in China from a widening middle class.
But some lawmakers said rather than demand for pork, China's one-sided trading policies were a key driving force for the Smithfield purchase. Sen. Stabenow questioned Chinese trade barriers.
"I'm all about exports, I want to see us export our products but it seems to me removing the unfair barriers from China would be a lot quicker and more efficient than saying the only way they can get in is if they own our company. That just doesn't make sense to me," Stabenow commented.
In response, the U.S. Chamber's Slane, said the takeover is about control. "The Chinese could easily go out and buy pork on the market," he noted, but the problem is that they subject themselves to huge price increases through trade barriers.
"I think the end game from the Chinese point of view is to ultimately dominate our domestic pork market," Slane said.
That comment was augmented later to the snickers of listeners in the hearing room when Sen. Pat Roberts, R-Kan., asked Smithfield CEO Pope, "Do you know you are a victim of a Chinese Communist plot? They own our debt, so you gotta be careful here," he said.
Pope declined to answer the question directly, instead focusing on his position that the merger could impact American pork producers and processors by expanding market availability.
"This is an opportunity to grow. We as an industry have struggled with growth in this country. Americans are eating less pork than they were 15 years ago, so without the opportunity to grow outside of the United States, there is no opportunity for the U.S. pork producer to expand," Pope said.
But Sen. Mike Johanns brought up the concerns of some of his constituents that control remains an issue, noting that if the situation was reversed, a U.S. company could not buy up a Chinese company.
"The Chinese regulators would laugh at you if you said, 'I'll just buy Shuanghui.' And to us, that is just very difficult," Johanns said.
But Pope clarified that regardless of ownership, USDA and Smithfield have strong food safety priorities and will protect the brand.
"This is a highly regulated industry," Pope said. "That's why people around the world take such comfort in the USDA stamp on products that they receive. And they will continue to have that assurance on anything, regardless of where the ownership is."
"I don't expect there to be a significant impact on our U.S. consumers," Pope noted.
The deal is under continuing review by the Committee on Foreign Investment in the U.S. The hearing comes after Stabenow last month asked the Secretary of the Treasury to include the USDA and FDA in the review process, noting its potential food security and economic implications.
An archived webcast of the hearing, can be viewed at ag.senate.gov.