POLITICS: PennAve

Chinese purchase of Smithfield prompts worries about US food safety

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Politics,White House,Food and Drink,Brian Hughes,Barack Obama,Government,PennAve

This is no ordinary business deal.

As Obama administration officials quietly review the sale of Virginia's Smithfield Foods to a Chinese company -- the largest sale ever of a U.S. firm to the Asian superpower -- some in Washington see not just a potential game-changer in business dealings between the two countries but also one that carries massive ramifications for the nation's food supply.

When the world's largest pork producer was sold to Shuanghui International Holdings for $4.7 billion, the news was greeted by unease in the broader agricultural community and by those who regulate it. In the weeks since, lawmakers' concerns have continued to grow.

"Smithfield might be the first acquisition of a major food and agricultural company, but I doubt it will be the last," Sen. Debbie Stabenow, D-Mich., said in a hearing on Capitol Hill. "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."

China has come under fire of late for lax food-safety standards. Critics point to a series of reports about contaminated and mislabeled meats. A Shuanghui affiliate has been accused of using veterinary drugs on hogs that are toxic for humans. More broadly, some lawmakers fear that pork produced in China would find its way into the United States.

Smithfield officials counter that the move makes economic sense for the United States, tapping an unmet market in China before somebody else inevitably does so -- and they say the deal won't affect their business on American soil. But food-safety advocates have begun a major lobbying effort to torpedo the transaction.

Critics also point out that Smithfield has plants near defense facilities and contracts with the military, which they say could hurt national security.

Although it has held hearings, Congress plays no role in approving the sale. The Committee on Foreign Investment in the United States, which falls under the Treasury Department, will make the final call.

CFIUS is one of the least known but most influential review bodies in Washington. The committee will essentially determine whether the deal poses any risks to U.S. national security, but critics have complained that the review process lacks any oversight.

"I met with them, and it was a very disappointing meeting," Sen. Chuck Grassley, R-Iowa, recently told reporters. "They informed us that we 'don't even admit we're considering something.'"

Some analysts see the nearly $5 billion deal as proof of a new era in which American companies will flow more freely into Chinese control.

"What the bid suggests is that Chinese companies are finally figuring out that, in most sectors, the U.S. economy is far more open to Chinese investment than they had believed," said Edward Alden, a senior fellow at the Council on Foreign Relations. "Many Chinese companies have long been frustrated by the U.S. security review process ... The U.S. government has never offered such a roadmap, but the sheer accumulation of deals is starting to suggest that one exists."

He added that eight of the 10 largest Chinese purchases of U.S. companies have happened in the last two years. According to 2011 CFIUS figures, the most recent available, 10 of the 111 cases reviewed by the committee that year were from China. Between 2009 and 2011, CFIUS approved 92 percent of all cases it reviewed.

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