Proposed Smithfield sale a good thing

 On May 29, U.S. pork giant Smithfield Foods announced a proposed $4.72 billion takeover by Shuanghui International Holdings, China’s largest meat producer.

Predictably, this announcement was met by the reflexive bias from many quarters that we have unfortunately come to expect regarding major foreign, and particularly Chinese, acquisitions of American firms. This is counterproductive in a time when the U.S. economy needs more, not less, foreign investment.

ADVERTISEMENT

Smithfield is not being purchased by “the Chinese” or their government. It is important to note here that Shuanghui is not a state-owned enterprise. It a private company, publicly traded on the Shenzhen stock exchange. In fact, Goldman Sachs at one point owned a majority stake in the firm and remains a significant investor. This is a corporate acquisition.   

There have been calls from some of my colleagues and outside interests for the U.S. Committee on Foreign Investment (CFIUS) to review or even block the deal. This is a shortsighted distortion of the role of CFIUS. The committee is designed to protect the national security interests of the United States, particularly to prevent foreign control of strategically critical companies and technologies. Frankly, I am unconcerned by Chinese access to American ham-spiraling technology. CFIUS should not be used as a tool of protectionism for its own sake. 

Many Americans have raised questions about what impacts this deal will have on food safety, labor rights and environmental issues. Just because Smithfield may be owned by a Chinese firm does not mean that its operations in the United States will no longer be subject to U.S. laws and regulations. 

In fact, the combined company’s American products and processes will still be subject to regulation by those same American regulators who have taken appropriately punitive enforcement actions against Smithfield in the past. Nor does this deal promise a sudden influx of Chinese pork products. China is a net importer of pork, and Chinese consumers are becoming increasingly discerning and vocal about the safety and quality of the meat they buy. Part of the value that Shuanghui is getting from this deal is access to higher-quality products produced with American standards by America’s farmers and workers, which can be exported and sold to Chinese consumers.

But this debate is about more than just one deal. It is about whether we want the United States to be perceived as “open for business” to the world. Historically, the United States has gained much of its economic growth by being a global leader in promoting open markets and the free flow of capital. We remain both the world’s largest recipient of foreign direct investment and the largest foreign direct investor. Foreigners invested $234 billion in the U.S. in 2011, for a cumulative total of $2.55 trillion in foreign owned assets in the U.S. These investments are a key contributor to our economic success. Foreign companies and their American subsidiaries have been key drivers of “insourcing” and the resurgence of American manufacturing. They employ more than 6 million Americans, maintain a payroll of over $400 billion and pay their employees wages 36 percent higher than the national average.   

It can only hurt our economic recovery if foreign investors become hesitant to deploy their capital in the U.S. because of anticipated political opposition. There is no question that we must protect our strategic interests, and the CFIUS process as it is currently structured is designed to do just that. However, using national security concerns as a means of discouraging foreign investment in areas where restrictions are not absolutely necessary undermines the ability of American trade negotiators and business people to gain access to foreign markets for our goods and services.

Export growth, particularly to expanding consumer markets like China, is critical to our economic future. Blocking deals like the Smithfield acquisition gives foreign governments a reason to maintain barriers to trade and investment that hurt America’s exporters. Of course, these barriers will exist even if Shuanghui is allowed to take over Smithfield, but China is gradually opening its markets and it does not serve our interests to be part of the problem.

To continue the dialogue about the variety of serious issues surrounding foreign investment, we are starting a bipartisan Foreign Direct Investment Caucus in the House. The caucus will focus on educating members of Congress so that we can make informed choices in a policy field that will only grow more important in an increasingly globalized world.

Moran represents Virginia’s 8th congressional district in the House of Representatives and is currently serving his 12th term. He sits on the Appropriations Committee.