U.S. Senator Debbie Stabenow (D-MI), Chairwoman of the U.S. Senate Committee on Agriculture, Nutrition and Forestry, today said we need to take a 'long-term view' of the proposed purchase of Smithfield Foods, the world's largest pork producer and processor, by China's Shuanghui International. Stabenow said the purchase would be precedent-setting as it would represent the largest purchase of a U.S. company by a Chinese firm ever. Today's hearing broadly examined how the government review process of foreign acquisitions of U.S. companies addresses American food safety, protection of American technologies and intellectual property, and the effects of increased foreign ownership of the U.S. food supply.
China's one-sided trading policies that may have required the Smithfield purchase in order to increase exports to China was also highlighted.
Smithfield CEO Larry Pope testified, as well as experts on US-China trade relations, global business, food safety and foreign acquisitions.
'I firmly believe that economic security is part of our national security, and that it should be considered when our government reviews foreign investment into the United States,' Stabenow said at a Committee hearing examining the purchase of Smithfield foods and future purchases of American food companies. 'We need to evaluate how foreign purchases of our food supply will affect our economy broadly, and frankly, whether there is a level playing field when it comes to these kinds of business purchases. Could this sale happen, if it were the other way around? Could Smithfield purchase Shuanghui? Based on what we've heard from many experts already, it sounds like the answer is ‘no.''
Chairwoman Stabenow, along with a number of Members of the Committee, urged the Secretary of the Treasury last month to include the USDA and FDA in the review process of the transaction, pressing that food safety and food security concerns have important implications for national and economic security.
'Smithfield might be the first acquisition of a major food and agricultural company, but I doubt it will be the last,' Stabenow said. 'That is why we must take a long-term view of what is happening. We need to be having this conversation and evaluating what is in the best interests of American families and our American economy because of the importance of our food supply, security, and safety.'
Witnesses who testified include Mr. Larry Pope, President and CEO, Smithfield Foods, Inc., Smithfield, VA; The Honorable Matthew J. Slaughter, Associate Dean for Faculty, Signal Companies' Professor of Management, Faculty Director of the Center for Global Business and Government, Tuck School of Business, Dartmouth College, Hanover, NH; Dr. Usha Haley, Professor and Director, Robbins Center for Global Business and Strategy, West Virginia University, Morgantown, WV; and, Mr. Daniel Slane, Commissioner, U.S.-China Economic and Security Review Commission, U.S. Chamber of Commerce, Washington, DC.
An archived webcast of the hearing, as well as the witness testimony, can be accessed on the Committee website at http://ag.senate.gov. Below are Chairwoman Stabenow's opening remarks, as prepared for delivery.
Opening Statement of Chairwoman Debbie Stabenow (D-Mich)Smithfield and Beyond: Examining Foreign Purchases of American Food CompaniesJuly 10, 2013As prepared for delivery
From the very beginning of human history, we have seen civilizations rise and fall based on their ability to feed their people. That is why food security is absolutely central to national security, and it is why food and agriculture are such an important and unique part of our American economy. Not a day goes by that every one of us in this room is reminded of the importance of a safe, affordable, and abundant supply of food in our country. It can be easy for Americans to forget that food doesn't just show up in the grocery store - it's a process that requires risk taking, sound business practices and a lot of hard work from the 16 million people whose jobs rely on agriculture.
That is why the news of Shuanghui International's proposed purchase of Smithfield foods, the largest purchase of a U.S. company by a Chinese firm, raises so many questions. Smithfield might be the first acquisition of a major food and agricultural company, but I doubt it will be the last. That is why we must take a long-term view of what is happening. We need to be having this conversation and evaluating what is in the best interests of American families and our American economy because of the importance of our food supply, security, and safety.
First, is our approval process adequate to handle issues unique to food security and safety? This is a precedent-setting case and we owe it to consumers, producers and workers to ensure we are asking the right questions and evaluating the long-term implications.
Last week, Senator Cochran and I along with a number of members of this Committee - urged the Secretary of the Treasury to include the USDA and FDA in the review process of this transaction by the Committee on Foreign Investment in the United States. We also asked that this be the process in any future transactions that involve our food supply. I firmly believe that economic security is part of our national security, and that it should be considered when our government reviews foreign investment into the United States. Unlike other countries, the United States does not currently undertake such a review, and I believe that needs to change.
Second, we need to evaluate how foreign purchases of our food supply will affect our economy broadly, and frankly, whether there is a level playing field when it comes to these kinds of business purchases. Could this sale happen, if it were the other way around? Could Smithfield purchase Shuanghui? Based on what we've heard from many experts already, it sounds like the answer is 'no.' I hope we can get some clarification on this point from our panelists today.
We need to be evaluating the long-term market implications of this deal for American workers, pork producers, and the farmers who grow grain and feed ingredients. 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 percent premium for the company. That, to me, raises questions about the economic motivations of the purchase. Is Shuanghui focused on acquiring Smithfield's technology, which was developed with considerable assistance by U.S. taxpayers? As with all of our food companies, Smithfield has benefitted from years of public investments improving feed rations, living conditions, environmental impact, food safety and efficiency.
Can we really expect increased access for our pork products in China, a country that already produces five times as many hogs as we do and that uses barriers to keep U.S. pork out of the country? Can we expect that after the company has adopted Smithfield's technology and practices, they will increase exports to Japan, our largest export market, in competition with US products? Most importantly, will we see volatility in prices and other long-term economic impacts?
In the short-term, I know this deal looks good for our producers. This also needs to be a good deal in the long-term. It's our responsibility to ask the right questions to make sure that we are thinking in the long-term about these issues. One pork company alone might not be enough to affect our national security, but it's our job to be thinking about the big picture and the long-term for American food security and economic security. Because as we all know on this committee, food security is part of our national security.