Saturday, July 13, 2013

The U.S. Senate Hog Wild over the Chinese Bid for Smithfield Pork

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 US, suddenly because the Chinese desires American pork, the US 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 allegations.

While the per capita American consumption of beef is around 7 times that of per capital Chinese consumption, China’s per capita consumption of pork is roughly 20% higher than in the US. 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 US. 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 US.

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 US 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 that’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 US 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 make a pig of themselves and 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.

A version appeared in New America Media and China-US Focus.