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The Deal: Senate Warned on China's Plans for U.S. Agriculture

NEW YORK ( The Deal) -- Critics of Shuanghui International Holdings' $7.1 billion bid for Smithfield Foods (SFD) characterized the proposed transaction as a massive transfer of intellectual property and agricultural know-how to China that will eventually eliminate American jobs and endanger food safety in the U.S.

"The risks outweigh the benefits," Usha Haley, director of West Virginia University's Robbins Center for Global Business and Strategy, told the Senate Agriculture Committee on Wednesday, July 10. She warned lawmakers that the companies' claim that the deal had nothing but upside to the U.S. -- by increasing exports of American pork to China without exposing Americans to any of China's well-documented food safety problems -- is false.

"Shuanghui is a highly subsidized and opaquely managed Chinese private company," she said. "This will affect food safety, how we do business and compatibility with our policies."

Haley noted that it took China only five years after it made its initial moves into food processing to move from having no exports in the business to become a major exporter, thanks to subsidies that allowed the country's food processors access to cheap land, labor and raw materials.

As a result, she said, China last year shipped 4 billion pounds of food to the U.S., including half the apple juice consumed here, 80% of the tilapia and 10% of the frozen spinach.

A similar path will occur with pork, she predicted. "The same will happen here," she said.

She said the adoption of Smithfield's industrial farming techniques and meat processing technologies eventually will result in the most profitable aspects of pork production being moved to China. "Smithfield could become the lowest rung on the commodity supply chain. High-value manufacturing could move to China, leaving low-value pork production here."

She said Australia and Africa have suffered problems as a result of China's direct investment in their countries and the U.S. will expose itself to similar threats, including the elimination of Securities and Exchange Commission filings after Smithfield is taken private. "This will double the number of jobs in the U.S. tied to Chinese direct investment."

She noted that the U.S. has periodically banned numerous Chinese foods and that, unlike grocery store items, foreign foods sold in restaurants or as processed foods do not need to be labeled as imported.
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