Running out of quality bacon is a clear and present danger to the United States. At least it should be. Barely any Virginia politician has a said word — good or bad — about the acquisition of Smithfield by Shuanghui International Holdings Limited, majority shareholder of mainland China’s largest meat processing enterprise, Henan Shuanghui Development. Yet, why would they?
It is not easy to campaign on a platform arguing that your proud that one of Virginia’s most iconic and well-known brands is now owned by a corporate entity with very close ties to the Communist Party of the People’s Republic of China (the only political party allowed in that country).
This week the federal government just about made it official. The Chinese will own Virginia’s Smithfield pork products. According to a company press release, the Obama Administration has cleared the transaction. There are apparently no national or food security concerns with a foreign government owning one of the world’s largest pork products producers. Smithfield Chief Executive Officer and President C. Larry Pope said: “We are pleased that this transaction has been cleared by CFIUS, and we thank the Committee for its careful attention to this review.” Respectfully, a CFIUS review does not even being to provide a patina of legitimacy for this transaction. There are much bigger equities at play here.
At some point, I expect a lot of Virginians who live in that part of the state will have a lot questions about the deal. But, rightly so, they cannot really concern themselves with who owns what because they need the jobs. According to folks I’ve talked to in that part of the state, there should have been a lot more warning as well as public commentary about the proposed investment. Some questions:
- I cannot help but wonder if Smithfield shareholders explored foreign investments from other countries?
- Why was the infusion of cash or the relationship with the Chinese government needed now?
- Why didn’t Virginia banks step up and, if it was needed, help?
- Is access to the Chinese market that important or could it had been offset with sales to other regions?
- What are the compliance costs of doing business in China and is it worth the aggravation?
- Notwithstanding the CFIUS review, how can Smithfield and the U.S. government guarantee food security? This is starting to sound like a FOIA request.
- Most importantly, fellow bacon connoisseurs, where will the highest quality bacon be sold, China or the United States?
The global agriculture market is very competitive. China is not one of the fair players. This is not very diplomatic, but, the Chinese government lies and cheats as a matter of course. It blocks entry of U.S. products all of the time. The Chinese government does not reciprocate when we grant it seemingly unlimited ability to export cheap goods to the United States.
Smithfield may have had to enter this special relationship to access the very lucrative Chinese market. Unlike Virginia’s Cuba exports — that really do not make any economic or long-term business sense — this transaction makes economic sense so long as they get to sell a lot in China. It is quite a gamble though. Only time will tell if this is a good investment and exposure for the Smithfield brand.
One of the best responses in opposition to the acquisition has come from Manassas Delegate Bob Marshall (R). His letter to the company says, in part:
Smithfield’s sellout to Shuanghui with its bad reputation will harm Virginia job holders, families, small Virginia pork producers unable to compete with a global giant, and yes, even our international Trade Balance as word spreads to homemakers and consumers about your sale of Smithfield to Shuanghui. Additionally, converting Smithfield from a publicly held company which has to provide CPA audited reports to the US Securities and Exchange Commission into a private venture will heighten suspicion of the food products produced by Shuanghui.
Smithfield, of course, has not responded.
I doubt this is the last we will hear of it. The grassroots are alive and well in the Commonwealth. This issue is not going to go away.