COMMENTARY: Senate hog wild over Chinese bid for Smithfield Pork

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George Koo

By George Koo
New America Media

When Shuanghui, China’s largest pork producer, made an offer to buy Smithfield, it should have been a straightforward business transaction. Smithfield is America’s largest pork producer. By acquiring Smithfield, Shuanghui would be positioned to fill China’s rising demand for more pork.

Chinese living in America have been long familiar with the premium priced Smithfield country ham; the cured meat reminds them of the taste of “Jinhua” ham famous throughout China. Through Shuanghui’s distribution channels, America stands to export a lot of pork to the most dynamic growing market in the world — not incidentally, exporting is an activity encouraged by President Obama for job creation.

What should have been a simple win-win deal is becoming a lot more complicated thanks to Congressional review. As presented at the hearing, the humble bacon has suddenly risen to become an ominous threat capable of imperiling the security of the United States.

According to the testimony of one alleged expert on China, Usha Haley, pork is a strategically important industry for China. Therefore even if heretofore pork consumption is declining in the U.S. suddenly because the Chinese desires American pork, the U.S. should think hard about denying them access.

Then Daniel Slane, a member of the U.S.-China Economic and Security Review Commission, artfully blackened the Chinese tycoon behind Shuanghui by labeling Mr. Wan Long a high-ranking member of the Chinese Communist Party at the beck and call of the Beijing government. The day after Mr. Slane’s testimony before the Senate Agriculture Committee The Wall Street Journal ran a profile on Mr. Wan that supported none of his assertions.

While the per capita American consumption of beef is around  seven times that of per capital Chinese consumption, China’s per capita consumption of pork is roughly 20 percent higher than in the U.S. Since China’s population is more than four times greater, the claim that China consumes a lot of pork is not in question. As China’s middle class continues to swell, demand for their favorite meat will only increase.

Hogs in China are raised mostly in small family-owned farms and could never match the productivity of factory farms in the U.S. Thus demand will continue to exceed domestic supply. That the Chinese hog farmers won’t be swamped by the import of American pork is only because some Chinese consumers prefer the more robust flavor of “free range” pork than the more consistent but blander tasting meat from the U.S.

There isn’t any question that Smithfield represents the standard that Shuanghui aspires to attain. Without a significant economic comparative advantage, there wouldn’t be any reason for Shuanghui to tender for the American company.

Part of the motivation for acquiring Smithfield would be to learn from the Americans in raising healthier hogs and producing more consistent quality of meats. Even if the Chinese improve their productivity using American technology, why should the U.S. object to having more pork to go around? It’s not as if pork has suddenly become a material for the weapons of mass destruction.

In fact, such a development would be a good thing for the world as a whole. Americans may eat more than what’s good for them, but the rest of the world wouldn’t mind having a bit of meat once in a while. In a world of burgeoning population facing perpetual hunger, for the august members of the U.S. Senate to look at this deal as a zero sum game — where Chinese dietary gain is somehow equated to America’s loss — reflects small minds of petty consequences.

But leave it to the politicians to raise the threat of national security at every imagined shadow even when cast by a dangling ham. “Shuanghui” could be loosely translated from Chinese as “both win.” If Senator Debbie Stabenow and her committee have their way, it seems only a “both party lose” outcome can satisfy their proclivity for xenophobic paranoia. (end)

Dr. George Koo is a retired international business consultant and a contributor to New America Media.

One Response to “COMMENTARY: Senate hog wild over Chinese bid for Smithfield Pork”

  1. pw says:

    None of Mr Koo’s statistics about Chinese pork consumption or demand points to need for Chinese ownership of a US pork producer. China is currently free to import as much pork as it (or its leadership) wants, but limits imports to protect domestic producers (not least Shuanghui) and because overseas production is not Chinese-owned (see the August 2, 2013 WTO ruling on China’s illegal duties on U.S. poultry exports).

    Mr. Koo’s idea (no doubt shared by the Chinese government) that the only way US pork should be allowed free access to China market is via Chinese ownership of the U.S. production goes against any concept of “fair” trade. By this reasoning Americans should own the factories producing goods for export to the US and the land underneath them, both of which would be illegal in China.

    The blatant requirement of Chinese ownership for free market access is not a “win-win” for China and the US, but a one-way street in favor of Shuanghui and the Chinese Communist Party (CCP). Wan Long may not be high-ranking CCP member but he would not have achieved his level of success nor have the current backing of the government without close ties to the Party, and without certain benefit to powerful individuals within it (see recent reports estimating Wen Jiabao’s family wealth at roughly $2.5bn, and Xi Jinping’s at $250m, etc. – this comes from special access to big deals). The CCP sets the import policies in China, which are the sole reason the deal is being proposed.

    Negative consequences of the Shuanghui deal for the US, whose interests the US Senate is charged with protecting, are Chinese access to US farmland (the reciprocal is not available to foreigners in China), a strong position in domestic commodity markets (ditto), and likely more than a few “special” visas for powerful Chinese wanting to spirit their money out of China and out of the reach of any future honest government which might require they give it back.

    China’s officials have been intimately involved in, and the primary beneficiaries of, the industrial policies that have poisoned most of the land and water in the country, while gobbling up huge amounts of prime farmland and illegally (according to their own laws) displacing millions of people. The results of China’s recent soil survey are a state secret, almost certainly due to unacceptable levels of pollution in most soils which pose a threat to the entire food supply.

    China’s leaders have long held out the lure of market access only to impose conditions benefiting themselves far more than the companies (or the home countries, home workers, or home taxpayers) wishing to do business there. Smithfield executives who, along with shareholders and farmers, might have profited handsomely from an open Chinese pork market, are instead hoping to sell out to guarantee themselves a huge payday at the expense of everyone else and, yes, of American food security.

    Happily, the US Senate seems wise to these tricks – not a moment too soon.

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