This sale of American pork giant Smithfield Foods to massive Chinese meat producer Shuanghai is just a little bit creepy, don't you think?
At the least it's a frightening reminder of the trend toward a globalized trade in the food we eat.
At the most it's an out-and-out national security risk.
Allegations of maggots, excessive bacteria and illegal additives have plagued Shuanghui, China's biggest meat products company, since at least 2011, according to a series of reports by China's state-run media.
The Wall Street Journal reports that both buyer and seller are so sure this week's $4.7 billion deal isn't scary that they opted for it to be reviewed by CFIUS, the governments foreign investment review committee. Pork and bacon a threat to national security? Don't be ridiculous, say these food behemoths.
And we have Smithfield representatives' promise that the American companys top management, sales strategy and plant operations won't change.
They promised. Feel better now?
Neither do I.
First, CFIUS reviews are conducted by a panel in secret. Approved or denied, we'll never know what the findings were or what the panel looked at. Shuanghai could be wallowing in chemicals banned in the United States for the last hundred years, for all we know. And CFIUS might not deserve it, but it has the same reputation as any regulatory commission on any level of government -- a cross between bloody awful and a joke.
Edward Shapiro, a Washington partner at Latham & Watkins LLP, told the WSJ that theres a perception the reviews are getting tougher, but cautioned CFIUS works on a case-by-case basis.
CFIUS has to strike a balance," Shapiro said, "between rigorous review and allowing commerce that they cant, and wouldnt want to, impede to go forward.
That means they err on the side of "Come on in!"
National security issues the review committee likely will look at?
Food Safety. In 2009, when Florida Agriculture Commissioner Adam Putnam was in Congress, he pitched hard for a bill on food safety. He wanted the same standards applied to food of foreign origin as were applied to food produced within the 50 U.S. states. The bill failed. And guess what? The U.S. Department of Agriculture, in charge of such concerns typically, doesnt have a seat at the CFIUS table.
Just in case, though, in a conference call, the companies came up with this food-safety comment: This is not a strategy to import Chinese pork into the United States. This is a strategy to export pork out of the United States.
Putnam remains committed to the need to increased food safety. He gave Sunshine State News this statement on the Smithfield-Shuanghai deal:
The United States has a gold standard of food safety, while many other countries struggle with frequent problems," said Florida's commissioner of agriculture and consumer services. "The fact that the largest U.S. acquisition by a Chinese company ever was a food company says much about the global growth opportunities in agriculture and the importance of food security here in our country.
Location. Where the hog farms are -- the physical location. Not that long ago sale of four wind farms to a Chinese company was blocked because they were too near American military air space.
Military contracts. Cheap bacon for soldiers. The government looks to make deals to cut defense costs. According to the Wall Street Journal,a deal for shoemaker LaCrosse Footwear by a Japanese company voluntarily sought CFIUS approval, and was cleared, because it supplied some boots to the U.S. military.Shuanghai could do what the Japanese company did and bribe its way in.
Private or state-owned? Shuanghai is a privately-owned company and not controlled by the government in Beijing. CFIUS will like that. Big point in favor of the deal going through.
Yes, Smithfield shareholders will make a bundle and the Smithfield-Shuanghai deal will probably zoom through. But these questions will keep me awake at night:
Can't we please slow down globalization in the marketplace in the name of national security? We're talking about America's ability to protect its capacity for food production and quality.
Is "cheaper" too great a risk when it comes to foreign production of American food? Are corporations too quick to focus on shareholder bottom line at the expense of public safety?
Congresswoman Rosa DeLauro, D-Conn., who held a key role in drafting the 2011 Food Safety Modernization Act, in a written statement on her professional website, says this: "This merger (between Shuanghui and Smithfield) may only make it more difficult to protect the food supply. I have deep doubts about whether this merger best serves American consumers and urge federal regulators to put their concerns first."
Wenonah Hauter, executive director of consumer advocacy group Food & Water Watch, said this in a statement: The Smithfield-Shuanghui marriage creates a cross-border bacon behemoth.
She said the deal will lead to farmer exploitation, more factory farms and a more complicated supply chain that leaves consumers at higher risk of food contamination.
She ended her remarks with this compelling thought: This merger tightens the grip of multinational agribusinesses and Wall Street on Americas kitchens.
And she pointed to investment bank Goldman Sachs role as a key Shuanghui investor.
Yes, I call it creepy.
Reach Nancy Smith at nsmith@sunshinestatenews or at (228) 282-2423.
