WASHINGTONThe Senate Agriculture Committee on Wednesday questioned the risks of a Chinese company acquiring Smithfield Foods, Inc., the world's largest pork processor and hog producer.
During a hearing, some lawmakers wondered how the deal would impact American jobs and U.S. pork prices and whether Shuanghui International Holdings Limited would eventually export pork to the United States and increase exports to other countries to the detriment of the U.S. agricultural industry.
Several individuals, including Smithfield Foods CEO Larry Pope, weighed in on the merger in remarks before the committee.
Pope, who has been with the company for more than 30 years, sought to assure lawmakers that the $7.1 billion acquisition by Shuanghui would not affect how it conducts business "except that we will do more of it."
Shuanghui will honor collective bargaining agreements and the contracts Smithfield Foods has with more than 2,000 family farmers, he said in prepared testimony before the U.S. Committee on Agriculture, Nutrition and Forestry. The Chinese company also intends to keep Smithfield Foods' management team and 46,000 employees, Pope said.
The acquisition will help China meet the escalating demand for pork, bolstering U.S. exports and creating more jobs and production for pork producers in this country, Pope added.
The reaction from the U.S. agricultural community has been overwhelmingly positive," he maintained.
The Committee on Foreign Investment in the United States is reviewing the acquisition to examine the impact on national security.
But the deal has raised other questions of national concern, including how it will affect food safety in the United States, and a bipartisan group of senators has urged Treasury Secretary Jacob Lew to give the U.S. Food and Drug Administration (FDA) and U.S. Department of Agriculture (USDA) authority to review the agreement as well.
Lawmakers planned to meet Wednesday with the Treasury Department to discuss what would reportedly mark history as the largest acquisition of an American company by a Chinese business.
That fact is disconcerting to at least some Americans, including Daniel Slane, a Commissioner with the U.S.-China Economic and Security Review Commission. Slane, who expressed his personal opinions and not that of his organization, refuted Pope's assertion that the Chinese government does not exert any control over Shuanghui. Wan Long, the chairman of the company, is a high-ranking member of the Community Party, Slane told senators.
He answers to the Community Party and if he does not do what they say they will remove him or worse," he said.
Matthew Slaughter, an associate dean with Dartmouth's Tuck School of Business, who supported the merger in testimony, said an increase in pork exports will reduce the $315 billion bilateral trade imbalance that exists between China and the United States.
Another professor who testified before the committee was against the deal. The Chinese "government exercises considerable influence on Shuanghui", which has been linked to food-safety problems in China including a scandal in which Shuanghui's buyers reportedly pressured farmers to spike pig feed with a chemical that has been banned in China and the United States, said Usha Haley, a West Virginia University professor.
"There is little doubt that this Chinese foray will be the first of many in the U.S. food and agriculture sectors," the professor, who has been researching Chinese business and global strategy for nearly 15 years, stated in prepared testimony. "Consequently, the deal merits a thorough examination by the Committee on Foreign Investment in the United States (CFIUS) and broader participation by the Department of Agriculture and other affected parties."
Debbie Stabenow (D-Mich.), who chairs the Senate Agriculture Committee, raised a speculative question during the hearing. Would the Chinese government allow Smithfield Foods to buy Shuanghui if the deal was reversed? Pope and Slaughter said they couldn't answer the question or didn't know. Haley and Slane were unequivocal that the answer was no.
Sen. Mike Johanns, a Republican from Nebraska, expressed doubt that there was a legal mechanism in place stop the merger.
Stabenow also questioned whether Congress has an approval process in place to adequately handle issues that are unique to food safety and security.
"This is a precedent-setting case," she said in opening statements, "and we owe it to consumers, producers and workers to ensure that we are asking the right questions and evaluating the long-term implications."