Pol: US Risks Losing Pork Industry to China
If U.S. regulators approve Chinese plans to purchase America's Smithfield Foods—the world's biggest pork producer—the United States risks losing its multibillion-dollar pork industry to China, Senate Agriculture Chairwoman Debbie Stabenow, D-Mich., told CNBC on Wednesday.
"We have a real potential in terms of losing this industry, I think, and its market share in the long run … they have more hog production and then they take over in terms of exports around the world," said Stabenow, noting China has five times more hog production capacity than the United States.
"Our largest export market is Japan. China is right next door. We're very export dependent in this industry, in the pork industry. What happens long term? Even though it looks like a good deal now, do we lose those export markets and potentially lose a tremendous amount of market share."
On Wednesday, U.S. senators, including Stabenow and Grassley, questioned Smithfield's chief executive about food safety and foreign ownership.
To Stabenow, the proposed $4.7 billion purchase by Shuanghui International, the largest acquisition ever of a U.S. company by a Chinese concern, likely aims to fix the country's long-standing problems with food safety, as well.
"Shuanghui is paying a premium of about 30 percent above what would be the market value to buy [Smithfield]. We think it's because they want the 20 years of food efficiency and food safety information and so on to be able to bring their systems up" to date, Stabenow said on CNBC's "Squawk on the Street."
"We, as a federal government, you and I as taxpayers, have put in over $800 million in research and development as it relates to food safety and feed processes and efficiencies and so on and essentially, we have a Chinese company buying that. They are buying it on a premium because they're behind us. They want all of our efficiencies, in part, paid for by federal taxpayers. They're 20 years behind us. So they get up to speed."
However, Stabenow said food safety is chief among her concerns about the deal.
"Food safety really is about national security. It's not just one company, even though it is the largest sale to a company in China and we know the Chinese system is very different in terms of how it's set up. It may not be directly owned by the Chinese government, but we all understand how tight and interwoven [that relationship] is," she said.
"But, what happens to us in terms of other companies down the road? Do we want other countries owning our food supply?"
Sen. Chuck Grassley, R-Iowa, who also sits on the agriculture panel, said he's concerned about the extent to which this deal might be an opening for Chinese pork to come into the U.S. food supply.
After all, recent scandals in China have fueled food safety concerns. Among the problems have been thousands of pig carcasses found floating down a river and milk tainted with the industrial chemical melamine that killed six and sickened thousands. In June, a fire at a chicken-processing plant in northeast China killed 120 people.
For China to export pork into the United States, though, it would need to meet the sanitary and phytosanitary standards mandated by the World Trade Organization.
"Obviously, if this could happen under the free trade agreements that we have, we would have to accept [Chinese pork] as long as it was safe and it met those standards," Grassley told CNBC's "Power Lunch."
Smithfield declined CNBC's request for an interview, but in a statement said the combined company has no plans to send Chinese meat to the U.S.
"The Shuanghui/Smithfield transaction is focused on exports and should help open up a large and growing pork market in China for U.S. hog farmers," the statement said, in part. "The combined company will not import any product from China into the U.S. As a result, the proposed combination does not have any implication for the U.S. food supply."
Smithfield CEO Larry Pope has vigorously defended the deal since it was announced in May, claiming it would not harm U.S. food safety.
"Shuanghui recognizes Smithfield's best-in-class operations, outstanding food safety practices and 46,000 hard working employees," Pope told Reuters in May. "There will be no impact on how we do business operationally in America and around the world as a result of this transaction."
Meanwhile, Grassley has concerns about what impact the deal might have on consumer choice and the price of pork products.
"We know in China the government plays a very major role and the extent to which that might be the case, how does that distort the marketplace for pork worldwide and even within the United States," he said.
Approval for the deal ultimately lies with the Committee on Foreign Investment in the United States (CFIUS), which is the interagency panel headed by the U.S. Treasury Department that reviews foreign investments for national security threats. CFIUS experts largely believe the deal will be approved, Reuters reported.
—Reuters contributed to this report.