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SMITHFIELD AND BEYOND: 

EXAMINING FOREIGN PURCHASES OF 

AMERICAN FOOD COMPANIES 

HEARING 

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION AND FORESTRY 

UNITED STATES SENATE 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

JULY 10, 2013 

Printed for the use of the 

Committee on Agriculture, Nutrition and Forestry 

( 

Available via the World Wide Web: http://www.fdsys.gov/ 

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

DEBBIE STABENOW, Michigan, Chairwoman 

PATRICK J. LEAHY, Vermont 

TOM HARKIN, Iowa 

MAX BAUCUS, Montana 

SHERROD BROWN, Ohio 

AMY KLOBUCHAR, Minnesota 

MICHAEL BENNET, Colorado 

KIRSTEN GILLIBRAND, New York 

JOE DONNELLY, Indiana 

HEIDI HEITKAMP, North Dakota 

WILLIAM ‘‘MO’’ COWAN, Massachusetts 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

SAXBY CHAMBLISS, Georgia 

JOHN BOOZMAN, Arkansas 

JOHN HOEVEN, North Dakota 

MIKE JOHANNS, Nebraska 

CHARLES E. GRASSLEY, Iowa 

JOHN THUNE, South Dakota 

CHRISTOPHER J. ADAMO, Majority Staff Director 

JONATHAN W. COPPESS, Majority Chief Counsel 

JESSICA L. WILLIAMS, Chief Clerk 

THOMAS ALLEN HAWKS, Minority Staff Director 

ANNE C. HAZLETT, Minority Chief Counsel and Senior Advisor 

(II) 

(III) 

C O N T E N T S 

Page 

HEARING(S): 

Smithfield and Beyond: Examining Foreign Purchases of American Food Companies .................................................................................................................... 1 

Wednesday, July 10, 2013 

STATEMENTS PRESENTED BY SENATORS 

Stabenow, Hon. Debbie, U.S. Senator from the State of Michigan, Chairwoman, Committee on Agriculture, Nutrition and Forestry ............................ 1 

Cochran, Hon. Thad, U.S. Senator from the State of Mississippi ....................... 3 

Witnesses 

Pope, Larry, President and CEO, Smithfield Foods, Inc., Smithfield, Virginia . 5 

Slaughter, Hon. Matthew J., Associate Dean for Faculty, Signal Companies’ 

Professor of Management, Faculty Director of the Center for Global Business and Government, Tuck School of Business, Dartmouth College, Hanover, New Hampshire .......................................................................................... 6 

Haley, Usha, Professor and Director, Robbins Center for Global Business 

and Strategy, West Virginia University, Morgantown, West Virginia ............ 8 

Slane, Daniel, Commissioner, U.S.-China Economic and Security Review Commission, Washington, DC .................................................................................... 10 

APPENDIX 

PREPARED STATEMENTS: 

Brown, Hon. Sherrod ........................................................................................ 34 

Grassley, Hon. Charles .................................................................................... 36 

Haley, Usha ...................................................................................................... 40 

Pope, Larry, ....................................................................................................... 58 

Slane, Daniel ..................................................................................................... 65 

Slaughter, Hon. Matthew J. ............................................................................ 71 

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Stabenow, Hon. Debbie: 

United Food and Commercial Workers International Union, prepared 

statement ....................................................................................................... 80 

United Food and Commercial Workers, ‘‘Summary of Data on Food Safety’’ ................................................................................................................... 83 

‘‘China Food Prices Continue Climb’’, article, Wall Street Journal, September 6, 2011 ............................................................................................... 86 

QUESTION AND ANSWER: 

Stabenow, Hon. Debbie: 

Written questions to Daniel Slane .................................................................. 88 

Written questions to Larry Pope ..................................................................... 88 

Written questions to Usha Haley .................................................................... 88 

Brown, Hon. Sherrod: 

Written questions to Larry Pope ..................................................................... 89 

Written questions to Daniel Slane .................................................................. 90 

Written questions to Usha Haley .................................................................... 90 

Written questions to Hon. Matthew J. Slaughter .......................................... 91 

Page

IV 

Cochran, Hon. Thad: 

Written questions to Hon. Matthew J. Slaughter .......................................... 92 

Gillibrand, Hon. Kirsten: 

Written questions to Larry Pope ..................................................................... 93 

Written questions to Daniel Slane .................................................................. 94 

Written questions to Usha Haley .................................................................... 95 

Grassley, Hon. Charles: 

Written questions to Usha Haley .................................................................... 96 

Written questions to Larry Pope ..................................................................... 96 

Written questions to Daniel Slane .................................................................. 96 

Written questions to Hon. Matthew J. Slaughter .......................................... 96 

Haley, Usha: 

Written response to questions from Hon. Debbie Stabenow ......................... 98 

Written response to questions from Hon. Sherrod Brown ............................ 101 

Written response to questions from Hon. Kirsten Gillibrand ....................... 105 

Written response to questions from Hon. Charles Grassley ......................... 107 

Pope, Larry: 

Written response to questions from Hon. Debbie Stabenow ......................... 112 

Written response to questions from Hon. Sherrod Brown ............................ 112 

Written response to questions from Hon. Kirsten Gillibrand ....................... 114 

Written response to questions from Hon. Charles Grassley ......................... 118 

Slane, Daniel: 

Written response to questions from Hon. Debbie Stabenow ......................... 122 

Written response to questions from Hon. Sherrod Brown ............................ 122 

Written response to questions from Hon. Kirsten Gillibrand ....................... 123 

Written response to questions from Hon. Charles Grassley ......................... 124 

Slaughter, Hon. Matthew J.: 

Written response to questions from Hon. Sherrod Brown ............................ 127 

Written response to questions from Hon. Thad Cochran .............................. 128 

Written response to questions from Hon. Charles Grassley ......................... 128 

(1) 

SMITHFIELD AND BEYOND: 

EXAMINING FOREIGN PURCHASES OF 

AMERICAN FOOD COMPANIES 

Wednesday, July 10, 2013 

UNITED STATES SENATE, 

COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY, 

Washington, DC 

The Committee met, pursuant to notice, at 2:32 p.m., room 562, 

Dirksen Senate Office Building, Hon. Debbie Stabenow, Chairwoman of the Committee, presiding. 

Present or submitting a statement: Senators Stabenow, Brown, 

Klobuchar, Gillibrand, Heitkamp, Cochran, Roberts, Boozman, 

Johanns, Thune, and Grassley 

STATEMENT OF HON. DEBBIE STABENOW, U.S. SENATOR 

FROM THE STATE OF MICHIGAN, CHAIRWOMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

Chairwoman STABENOW. Good afternoon. 

The Senate Committee on Agriculture, Nutrition, and Forestry 

will now come to order. 

Before we begin the hearing, I just want to take a moment for 

our Committee members to say again how proud I am of this Committee in working together in a bipartisan way to pass the Farm 

Bill, not once but twice, two different distinguished Ranking Members. 

We know there are some challenges in the other body but I am 

confident that the leadership and the role models that we have set 

in working together will ultimately prevail. 

I just want to thank everyone again for working hard, listening 

to each other, being willing to make some compromises in the interest of passing a bill and making agreements and sticking to 

them and working hard. 

Senator Cochran, I want to thank you also for your leadership 

in doing that; and I am proud that we have been able to get that 

done. 

From the very beginning of human history, we have seen civilizations rise and fall based on their ability to feed their people. That 

is why food security is absolutely essential to National security, 

and it is why food and agriculture are such an important and 

unique part of our American economy. 

Not a day goes by that every one of us in this room is reminded 

of the importance of a safe, affordable, and abundant food supply. 

It can be easy for Americans to forget that food does not just show 

2 

up in the grocery store. Sometimes I feel we have to remind people 

of that. It is a process that requires risk taking, sound business 

practices, and a whole lot of hard work from the 16 million people 

whose jobs rely on agriculture. 

That is why the news of Shuanghui International’s proposed purchase of Smithfield Foods, the largest purchase of a U.S. company 

by a Chinese firm, raises so many questions. Smithfield might be 

the first acquisition of a major food and agricultural company, but 

I doubt it will be the last. 

That is why we must take a long-term view of what is happening. We need to be having this conversation and evaluating 

what is in the best interests of American families and our American economy because the importance of our food supply, and security, and safety cannot be underestimated. 

First, is our approval process adequate to handle issues unique 

to food security and safety? Important question, this is a precedentsetting case and we owe it to consumers, producers, and workers 

to ensure we are asking the right questions and evaluating the 

long-term implications. 

Last week, Senator Cochran and I along with a number of members of this Committee urged the Secretary of the Treasury to include the USDA and FDA in the review process of this transaction 

by the Committee on Foreign Investment in the United States, and 

that is why we will be meeting later today with officials from the 

Department of Treasury in conjunction with the Banking Committee so that Senators can get briefed on the CFIUS process. We 

also ask that this be the process in the future for transactions involving the food supply. 

I firmly believe that economic security is part of our National security and that it should be considered when our government reviews foreign investment into the United States. Unlike other 

countries, the United States does not currently undertake such a 

review and I believe that needs to change. 

Second, we need to evaluate how foreign purchases of our food 

supply will affect our economy broadly, and frankly, whether there 

is a level playing field when it comes to these kinds of business acquisitions. 

Could this sale happen if it were the other way around? Could 

Smithfield purchase Shuanghui? Based on what we have heard 

from many experts already, it sounds like the answer is ‘‘no’’. I 

hope we can get some clarification on this point from our panelists 

today. 

We need to be evaluating the long-term market implications of 

this deal for American workers, pork producers, and the farmers 

who grow grain and feed ingredients. 

Despite the strength of America’s pork sector, Smithfield has 

been struggling to make a profit, and yet Shuanghui is offering to 

pay a 30 percent premium for the company. That, to me, raises 

questions about the economic motivations of the purchase. 

Is Shuanghui focused on acquiring Smithfield’s technology, which 

was developed with considerable assistance by U.S. taxpayers? As 

with all of our food companies, Smithfield has benefited from years 

of public investments improving feed rations, living conditions, environmental impact, food safety and efficiency. 

3 

Can we really expect increased access for our pork products in 

China, a country that already produces five times as many hogs as 

we do and that uses barriers to keep U.S. pork out of the country? 

Can we expect that after the company has adopted Smithfield’s excellent technology and practices, they will increase exports to 

Japan, our largest export market, in competition with U.S. products? Most importantly, will we see volatility in prices and other 

long-term economic impacts? 

In the short-term, I know this deal looks good for our producers. 

This also needs to be a good deal in the long-term. It is our responsibility to ask the right questions to make sure that we are thinking in the long-term about these issues, that is why we are here. 

One pork company alone might not be enough to affect our National security, but it is our job to be thinking about the big picture 

and the long term for American food security and economic security. Because as we all know on this Committee, and we have all 

said so many times, food security is a part of our National security. 

I would now like to turn to my good friend and Ranking Member, 

Senator Thad Cochran, and I appreciate very much your leadership 

on the Committee. 

STATEMENT OF HON. THAD COCHRAN, U.S. SENATOR FROM 

THE STATE OF MISSISSIPPI 

Senator COCHRAN. Madam Chairman, thank you for holding this 

hearing. We are very anxious to learn more about the facts with 

respect to the proposed transaction that this Committee will be 

considering today. 

We want to thank you, Madam Chairman, for your impressive 

leadership of the Committee and the example you have set by the 

passage of a Farm Bill that still has us beaming with pride over 

the success of that undertaking. 

We likewise, think it is important for us to follow your leadership 

again in the analysis and review of this proposed transaction between Smithfield Foods and Shuanghui because, first of all, it is 

one of the most widespread in terms of possible economic impact 

of a transaction or acquisition of a U.S. company by a Chinese company in history. That is what we are being advised. 

But it is the questions that flow from this that bring us to this 

point, and we are anxious for our witnesses to touch on that and 

things that we should know so we will appreciate the economic consequences for our country as well as the possible benefits that will 

flow to the individual companies that are involved. 

The U.S. economy has long benefited from investments from 

overseas. We hope to be able to make some assurances or draw 

some conclusions about the consequences in advance of this transaction that is under review today. 

We are proud of our American agriculture producers and our food 

processors and distributors. We have the best in the world and we 

are proud of that and we want to keep it that way. 

But today, we are here to listen to our witnesses to help better 

acquaint us with what we think we need to know. 

Thank you for your cooperation with our Committee. 

Chairwoman STABENOW. Thank you very much, and we welcome 

all of our witnesses. We very much appreciate your time today and 

4 

let me introduced each of you. Senator Brown is going to introduce 

one of our witnesses and then we will ask each of you to speak for 

five minutes. 

We welcome whatever written testimony you would like to give 

us as well. Also any other follow-up testimony after today that you 

would like to give us we would welcome as well. 

So, I will introduce everyone together and then turn to our first 

witness. 

Our first witness on the panel is Mr. Larry Pope, President and 

CEO of Smithfield Foods. Mr. Pope has served as president and 

chief executive officer of the company since 2006. He previously 

served as president and chief operating officer from 2001 to 2006 

and vice president and chief financial officer from 2000 to 2001. 

Mr. Pope’s over 30-year career at the company spans a variety of 

senior management roles and responsibilities which provide an indepth knowledge of the company and broad experience in operational finance accounting and risk management matters. So, we 

welcome you today. 

Our second witness on the panel is Dr. Matthew Slaughter, Associate Dean for Faculty at Tuck School of Business at Dartmouth 

College. Dr. Slaughter joined Dartmouth’s faculty in 1994, focusing 

his research on the economics and politics of globalization. From 

2005 to 2007, Dr. Slaughter served as a member of the Council of 

Economic Advisors for President Bush. Recently, Dr. Slaughter has 

focused on the global operations of multinational firms and on 

labor market impacts of international trade and investment. We 

welcome you as well today. 

Our third witness is Dr. Usha Haley, Professor of Management 

and Director of the Robbins Center for Global Business and Strategy at West Virginia University. Dr. Haley’s extensive research includes over 200 articles and presentations and multiple books that 

explore companies and business environments in India, China, 

Southeast Asia, and Mexico. Her research on Chinese subsidies has 

also supported trade regulations in the United States and the European Union. Welcome to you. 

Finally, I would like to turn to Senator Brown for the next introduction. 

Senator BROWN. Thank you, Madam Chairman. I want to introduce Dan Slane, Commissioner on the US–China Commission, 

third term on that commission, appointed by Speaker Boehner, formerly worked in the Ford White House a few years ago. 

Dan Slane has an understanding, a particularly good understanding as you will hear from his testimony, as you will hear from 

his speaking today and see his written testimony, seeing China 

both as the threat and the opportunity both that it can be and is 

to our country in terms of economics and in terms of National security, and I think he has a particularly acute understanding of that 

and I look forward to hearing him also. 

As a former member of the Iowa State University Board of Trustees, he proudly always wears his lapel pin signifying that, football 

season, basketball season, academic season alike. So, thank you. 

Chairwoman STABENOW. Senator Brown, you had me up to that 

point. As a Michigan State University graduate, I need to have my 

green and white on today, Commissioner. 

5 

Mr. Pope, welcome. 

STATEMENT OF LARRY POPE, PRESIDENT AND CEO, 

SMITHFIELD FOODS, INC., SMITHFIELD, VIRGINIA 

Mr. POPE. Afternoon. Good afternoon, Chairwoman Stabenow, 

Ranking Member Cochran, and members of the Committee. My 

name is Larry Pope. I am the President and Chief Executive Officer of Smithfield Foods, a global food company and pork producer 

based in Smithfield, Virginia. 

I appreciate this opportunity to offer testimony to the Committee 

today. At this time, I would like to summarize my written testimony which I submitted for the record. 

We at Smithfield are very excited about our announced new partnership with Shuanghui, the majority owner of China’s largest 

pork processor. It provides enormous benefits for our two companies, for American manufacturing, and American agriculture. 

It is a partnership that is all about growth and improving the agricultural environment in both the U.S. and China. The combined 

company expects to help meet the growing demand for pork in 

China by exporting high quality poor products from the U.S. This 

means increased capacity for U.S. producers, more jobs in processing, and more exports for the U.S. economy. 

At the same time, we will continue to supply our same high quality, renowned products to U.S. consumers as well as other markets 

around the world. In short, this partnership for growth is good for 

our business and for the producers and the suppliers with whom 

we work. 

The reaction from the U.S. agricultural community has been 

overwhelmingly positive. The Michigan, Indiana, North Carolina 

Pork Producers Association, the North American Meat Association, 

industry leaders, and numerous individual producers have expressed support for this transaction. 

Growth is also very good for Smithfield’s employees and our communities. We have a saying. It will be the same old Smithfield only 

better. Let me be clear. Shuanghui intends to retain Smithfield’s 

management team, its plants, and all of its employees. 

Shuanghui recognizes Smithfield’s best in class operations, outstanding food safety practices, and our 46,000 hard-working employees. 

There should be no noticeable impact on how we do business 

operationally in America and around the world as a result of this 

acquisition except that we plan to do more of it. 

Shuanghui will honor our collective bargaining agreements in 

place with Smithfield’s union-represented employees as well as existing wage and benefit package arrangements for our non-represented employees. 

These commitments, combined with the opportunities for growth 

created by this deal, have elicited the support of the UFCW and 

our employees. 

With respect to agriculture, we expect this transaction to drive 

growth and expansion not only for our growers but for the entire 

U.S. pork industry. Smithfield Foods owns 400 hog farms and has 

contracts with over 2000 family farms across the country. Our 

6 

agreement with Shuanghui will maintain all of these contracts and 

arrangements. 

Moreover, this transaction creates a terrific opportunity through 

growth in exports for U.S. hog farmers to expand to meet the growing Chinese demand. 

The integrity of our brands, our record of safety, the safety of the 

U.S. food supply, and the recognized effectiveness of U.S. food safety standards are key drivers of value that Shuanghui places on 

Smithfield. 

Our brands are recognized as representing the highest quality, 

safest and most desired product throughout the world including 

China. Our combined company thus has every incentive to ensure 

the continued safety and excellence of our products and brands. 

This transaction is about exporting high quality meat from the 

U.S. to China to meet their growing demand. This combination will 

not result in any U.S. imports of food from China. Moreover, all 

food products imported into the U.S. are already subject to rigorous 

inspections and controls by America’s regulators to ensure their integrity, safety, and wholesomeness. U.S. pork producers are the 

best and the most efficient in the world. 

We have voluntarily sought review of this acquisition from the 

Committee on Foreign Investment in the U.S. where the transaction is already undergoing a thorough review. 

I appreciate this opportunity to address the Committee and I 

welcome your questions. 

[The prepared statement of Mr. Pope can be found on page 58 

in the appendix.] 

Chairwoman STABENOW. Thank you very much 

Dr. Slaughter. 

STATEMENT OF THE HON. MATTHEW J. SLAUGHTER, ASSOCIATE DEAN FOR FACULTY, SIGNAL COMPANIES’ PROFESSOR OF MANAGEMENT, FACULTY DIRECTOR OF THE 

CENTER FOR GLOBAL BUSINESS AND GOVERNMENT, TUCK 

SCHOOL OF BUSINESS, DARTMOUTH COLLEGE, HANOVER, 

NEW HAMPSHIRE 

Mr. SLAUGHTER. Committee Chairwoman Stabenow, Ranking 

Member Cochran, and fellow Members, thank you very much for 

inviting me to testify on these important and timely issues of how 

foreign purchases of American companies affect U.S. jobs and overall economic strength. 

In my testimony, I will make three main points that together 

help explain the many benefits that the Shuanghui acquisition of 

Smithfield Foods should bring to Smithfield’s stakeholders including its employees and to the broader U.S. economy. 

First, merger-and-acquisition transactions have long been the 

main strategy by which global companies establish and expand operations in America. Acquisitions of U.S. companies by foreign entities are an everyday reality in the today’s global economy. 

Indeed, here in 2013 there have already been nearly 500 such acquisitions, about three every business day. These transactions have 

long been critical for the United States to benefit from inward foreign direct investment. 

7 

For decades, the vast majority of new FDI into America has come 

in the form of M and A transactions rather than via greenfield investments that establish a brand-new company. 

From 1987 through 2006, the United States received $2 trillion 

in new FDI, of which 88.8 percent was accounted for by foreign 

companies buying American companies. 

The second main point of my testimony is that U.S. affiliates of 

global companies, despite accounting for far less than 1 percent of 

U.S. businesses, have long performed large shares of America’s productivity-enhancing activities that lead to millions of the kind of 

high wage jobs that America needs in this slow recovery from the 

great recession. 

In 2010, the U.S. subsidiaries of global companies produced 

about 6 percent of all U.S. private sector output. They undertook 

over 14 percent of both non-residential, private sector capital investment and of total U.S. private R and D. They accounted for almost 18 percent of U.S. exports of goods, and they did all of this 

while purchasing almost $2 trillion dollars in intermediate inputs 

from other U.S. companies. 

All these activities contribute to millions of high-paying jobs here 

in America. In 2011, these U.S. affiliates employed 5.6 million 

workers in the United States, 5 percent of total private employment, at a per-worker average compensation of over $77,000, more 

than a third above the U.S. average and at higher unionization 

rates than at other U.S. companies. 

The third main point of my testimony is that all public information about the Shuanghui-Smithfield transaction indicates it will 

benefit Smithfield’s stakeholders and the broader U.S. economy by 

maintaining a high innovation enterprise. 

A primary motivation for Shuanghui is to access and learn from 

Smithfield’s expertise in a number of related areas, including its 

strong management team, its leading brands, and its vertically integrated business model. This motivation accords with much of the 

historical pattern of inward FDI into America. 

Consistent with this historical pattern, and as Mr. Pope explained, post acquisition Smithville plans to operate largely as it 

does today. All key leaders and management teams will remain in 

place, all collective bargaining agreements and wage and benefit 

arrangements will be honored with all employees, and no plants or 

facilities will be closed. 

There is nothing inherently worrisome or unusual about the Chinese aspect of this transaction. What about the risks of stateowned enterprises? Although SOEs remain prominent in China, 

Shuanghui is not one. In fact, its stakeholders include Goldman 

Sachs. 

What about possible risks to Smithfield’s intellectual property? 

IP theft in China has quickly become one of the gravest threats to 

the global economic system and to innovative U.S. companies and 

their workers here at home. 

In this context, it is important to see that the Smithfield transaction offers exhibit A of the ideal solution to this grave problem, 

an American company being paid by a Chinese company billions of 

dollars for its ideas in a transparent market-based deal. 

8 

Indeed, Shuanghui seeks to deploy Smithfield’s expertise, products, and brands in China largely through boosting Smithfield’s exports to China to better meet surging poor demand driven by rising 

household income growth in Chinese families. These greater exports will help reduce the U.S.-China bilateral trade imbalance 

that last year reached a record $315 billion. 

There also appears to be nothing inherently worrisome about the 

food aspect of the Smithfield transaction. As with many industries 

in food manufacturing, global companies have long played an important role in the U.S. economy. These global food companies already today employ over 200,000 American workers. 

Let me close by placing the Smithfield transaction in the context 

of an America that today continues to confront too few jobs and too 

little economic growth. The good news is there is a future in which 

America can create millions of good jobs connected to the world via 

international trade and investment. 

Should it ultimately goes through, a smooth Smithfield purchase 

would send a valuable signal to China and to the world that the 

United States welcomes inward investment at a time where it is 

especially needed. 

Thank you again for your time and interest in my testimony. I 

look forward to answering any questions you may have. 

[The prepared statement of Mr. Slaughter can be found on page 

71 in the appendix.] 

Chairwoman STABENOW. Thank you very much. 

Dr. Haley. 

STATEMENT OF USHA HALEY, PROFESSOR AND DIRECTOR, 

ROBBINS CENTER FOR GLOBAL BUSINESS AND STRATEGY, 

WEST VIRGINIA UNIVERSITY, MORGANTOWN, WEST VIRGINIA 

Ms. HALEY. Good afternoon, Chairwoman Stabenow and Committee members. I have submitted my full statement to the Committee which I ask be made part of the hearing record. 

My name is Usha Haley, currently Professor and Director of the 

Robbins Center for Global Business and Strategy, West Virginia 

University. 

I have researched Chinese business and global strategy for almost 15 years. The point of my testimony is that this takeover provides long-term benefits to China, Henan province and Shuanghui, 

and short-term benefits to Smithfield’s managers and shareholders. 

But, the medium and long-term benefits to U.S. consumers, industry, and society are questionable and the risks outweigh the benefits. 

Shuanghui is a highly subsidized and opaquely managed Chinese 

private company. This largest takeover of an American by a Chinese company will double the number of our jobs tied to Chinese 

direct investment. 

As Australian and African experiences with China show, problems arise. After the acquisition, Smithfield will not trade publicly 

and information will come from Chinese reports. This deal will affect food safety, how we do business, and compatibility with our 

policies. 

9 

In China, politics trumps economics. No free market exists for 

China’s food products and arguments of the efficiencies from global 

logistics fall short. When subsidies and negative externalities such 

as pollution exist as they do here, markets can no longer set prices. 

U.S. pig farming is a consolidated, modern industry with economies of scale. The Chinese pork industry is fragmented, smallscale, and low tech as in the paper and other strategic Chinese industries we studied. Labor costs there were similar to food processing, under 7 percent from purchases. Scale economies mattered. 

Yet, in five years China moved from net importer to largest manufacturer and exporter. 

We found that subsidies gave China that hidden advantage: free 

loans, cheap raw materials, energy, and land, and tech acquisition 

support. 

Shuanghui’s subsidiary almost certainly gets subsidies from its 

province just as competitor Yurun Pork with subsidies to net profits of 36 percent. 

Pork processing is a strategic industry for China. Shuanghui’s 

subsidiary is Henan’s largest employer in the province’s pillar industry. Beijing’s indigenous innovation policies also subsidize applied research in pork processing. 

A state-owned bank may finance the Smithfield take over. Another will help with exports. Smithfield could become the lowest 

rung of the commodity supply chain. 

High-value manufacturing would move to China leaving low 

value, low tech pork production here. Shuanghui could insert local 

hogs and re-export processed food back to the U.S. under the 

Smithfield brand. 

But evaluating Shuanghui is difficult. The Smithfield bid included Goldman but also New Horizon, founded by Winston Wen, 

the former Chinese prime minister Wen Jiabao’s son. In China, annual reports and formal reporting relationships never tell the full 

story. 

Chairman Wan Long is a member of China’s National People’s 

Congress that formalizes the Chinese Communist Party’s measures. Accounting data provide little information on these businessgovernment links. Incomplete information could impact the stock 

market, company evaluations, pricing, and other food producers’ 

competitive positions. 

There have been outrageous food safety violations. Shuanghui 

fed pigs the banned chemical clenbuteral. Chinese food horrors include glowing pork, cadmium rice, rat meat sold as mutton, toxic 

milk, et cetera, et cetera. 16,000 dead pigs floated down a Shanghai 

river in March. 

Smithfield’s Larry Pope recently said, ‘‘Open your refrigerator 

door, look inside. Nothing in there is made in China because American agriculture is the most competitive and efficient in the world.’’ 

Mr. Pope is wrong. China shipped four billion pounds of food to the 

U.S. last year including half the apple juice, 80 percent of the 

tilapia, and more than 10 percent of frozen spinach. 

The U.S. has periodically banned numerous imported Chinese 

foods. Supermarkets display imported foods’ country of origin but 

restaurants do not. Also processed imported foods require no such 

labeling. 

10 

IP protection in China is also poor. Increased counterfeit American food products from China will lead to brand dilution and loss 

of U.S. export markets. 

With record subsidies, China is encouraging buying foreign food 

assets and farms. Smithfield is the first and we should prepare for 

others in agriculture as a matter of national interest. 

For China, Smithfield provides benefits of American land, water, 

brands, and technology. As Continental Grain argued, benefits 

even to Smithfield’s shareholders are unclear. In a conference call 

with analysts, Shuanghui’s managing director said, ‘‘We want the 

business to stay the same but be better.’’ 

Today, Mr. Pope echoed this sentiment. Neither explained how 

Smithfield would become better without technology or know-how 

from Shuanghui. Neither elaborated on better for whom, the question that CFIUS and this Committee should be asking on behalf of 

the American people. 

Thank you for the opportunity to appear here today. I stand 

ready to answer any questions. 

[The prepared statement of Ms. Haley can be found on page 40 

in the appendix.] 

Chairwoman STABENOW. Thank you very much. 

Commissioner Slane. 

STATEMENT OF DANIEL SLANE, COMMISSIONER, U.S.-CHINA 

ECONOMIC AND SECURITY REVIEW COMMISSION, WASHINGTON, DC 

Mr. SLANE. Chairwoman Stabenow, Ranking Member Cochran, 

and members of the Committee, thank you for the opportunity to 

appear today. 

Prior to serving on the U.S.-China commission, I owned and operated three plywood factories in China. The U.S.-China Economic 

and Security Review Commission, on which I serve, has not taken 

a position on this proposed transaction and has not made any public statements on it. The views I present today are entirely my own. 

Shuanghui’s purchase of Smithfield is part of China’s far-reaching program of foreign investments aimed at gaining as much control of key foreign sources of supply as possible. I remain concerned 

that many of the largest Chinese enterprises, including Shuanghui, 

maintains strategic ties to the Chinese government whether 

through direct ownership or control, preferential access to massive 

government subsidies, or personal links to the Chinese Communist 

Party. It is important to understand that the Chinese government 

is really behind China’s global economic expansion. 

With 21 percent of the world population, China has only 7 percent of the productive farmland. The country suffers from severe 

water shortages in its northern half and extensive surface water 

and air pollution. When you couple this with the growing demand 

for meat, you can begin to understand the enormous challenges 

faced by China’s leadership and its agro industry. 

China does not have sufficient farmland to grow as the feedstock 

required to produce the amount of meat and dairy demanded by 

their citizens. China is on track to spend a record amount on the 

purchase of food assets and farms. The drive for agricultural assets 

11 

in South America, Australia, Africa, and other locations has ignited 

concerns for lawmakers around the world. 

In my view, the purchase of Smithfield by China is the first of 

what I would expect to be many forays into rural America. China’s 

purchase of Smithfield is driven by two major factors. 

Number one, China wants some control over the commodity price 

of pork. With Smithfield’s commanding domination of the U.S. pork 

industry, they can have some impact on pricing. 

Number two, the Chinese want Smithfield’s valuable technology 

in hod genetics. Smithfield also has some of the most advanced 

meat processing technology and manure management techniques 

that help foster industrial scale hog production. It is interesting to 

note that U.S. taxpayers help finance much of Smithfield’s growth 

through USDA grants. 

Now, I would like to turn to the potential impact this purchase 

may have on our economy. Number one, Shuanghui’s takeover of 

Smithfield will exacerbate a pattern of U.S. trade relations that 

have taken hold over the past 10 years whereby value-added production is shifted to or owned by China to the detriment of U.S. 

workers and businesses. 

It raises the question of whether allowing a Chinese company to 

dominate our pork processing industry is in the best interest of the 

United States. If this deal is approved, it will open the door for 

other purchases of U.S. food companies by Chinese firms or investors. 

Our agriculture and food sector is unusually concentrated with 

just a few companies dominating the market in each link of our 

food chain. 

Number two, another risk is that this deal will do little to improve overall market access for U.S. pork. China is unlikely to 

abandon its policy of self-sufficiency meat production. A more likely 

result is a closed market, intracompany trade between Shuanghui 

and the Smithfield. Given Smithfield’s massive output, it alone 

might suffice for China’s limited quota of U.S. pork. 

Number three, this deal has been promoted as a way to facilitate 

U.S. pork exports to China, but ultimately, Shuanghui could export 

pork back to us. The adoption of Smithfield’S hog genetics and 

processing technologies will dramatically improve hog production in 

China and could allow Shuanghui to reverse the global flow of pork 

products, and if approved, begin the export of Chinese pork to the 

U.S.. 

Shuanghui is expected to apply for approval to re-export pork 

products processed from imported U.S. hogs and may even apply to 

ship pork from hogs raised in China. 

Number four, providing foreign competitors access to Smithfield’s 

technology and intellectual property could disadvantage our domestic hog industry both here and globally. 

Shuanghui is expected to adopt Smithfield’s hog genetic lines 

that could weaken U.S. pork opportunities. 

Shuanghui has extensive supply chain and distribution system in 

China and throughout Asia with operations in Japan and South 

Korea. The merger would improve the position of Shuanghui’s 

mainland China processing plants by sharing U.S. technology and 

expertise and potentially allowing Shuanghui to undercut U.S. 

12 

pork exports to the Pacific Rim. It will limit the ability of other 

U.S. exports to get a foothold in this market. 

In conclusion, I think it is reasonable for you to expect a wave 

of Chinese investments into our food and agricultural industry. As 

China becomes a global player and a fierce competitor in American 

markets, its political system and state capital ideology pose a 

threat. 

With that in mind, the commission in its report to Congress last 

year made the following recommendation. Congress examine foreign direct investment from China to the United States and assess 

whether there is a need to amend the CFIUS statute to, number 

one, require a mandatory review of all controlling transactions by 

Chinese state-owned or state-controlled companies investing in the 

United States. 

Number two, add a new economic benefits test to the existing 

National security test that CFIUS administers, and three, prohibit 

an investment in a U.S. industry by a foreign company whose government prohibits foreign investments in that same industry. 

Thank you for allowing me to testify. 

[The prepared statement of Mr. Slane can be found on page 65 

in the appendix.] 

Chairwoman STABENOW. Thank you very much to each of you. 

Let me just start the questioning with something simple. If you 

can do yes or no that would be great, and that is and we will start 

with Mr. Pope. 

If this transaction were to happen in the reverse, would China 

allow Smithfield to buy Shuanghui? 

Mr. POPE. Senator, I am not sure I am an expert on reverse 

mergers into China and so I would yield to those at the panel who 

have more expertise in terms of that. But, I know there are U.S. 

acquisitions into China. I could not really answer that question one 

way or the other. 

Chairwoman STABENOW. When you and I met, you talked about 

originally looking at your buying a portion of their company, their 

buying a portion of yours. There was an attempt at that, what happened there? 

Mr. POPE. We had a discussion about five years ago about 

Shuanghui buying 20 percent of Smithfield and Smithfield buying 

20 percent of Shuanghui. Chairman Wan and myself had that. 

Then over the period of time that did not occur. 

I do not remember any involvement of the Chinese government 

approving or disapproving. In fact, I am not sure anyone in the 

government was even ever aware of the conversations and so I do 

not think there were any regulatory barriers to that. There were 

more business issues associated with that, and we had subsequent 

conversation even since then. 

Chairwoman STABENOW. Okay. Thank you. 

Dr. Slaughter, yes or no, could that happen in reverse? 

Mr. SLAUGHTER. I do not know. I do know that China’s amazing 

growth since 1978 has come in some basic sense by the government 

getting out of the business of running business. They had a complete command and control economy for decades. It remains a work 

in progress. 

Chairwoman STABENOW. Okay, Dr. Haley. 

13 

Ms. HALEY. No, as a matter of fact, it would not happen. That 

same question was raised in a Chinese blog, Weibo, and a big debate about it followed. Everybody said no there as well. 

The reason is this is a strategically important industry; and as 

most people in China know, the power of the state has actually 

been increasing vis-a-vis-private interests in China as a proportion 

of total production. So this is, no. 

Chairwoman STABENOW. Commissioner Slane, could this happen 

in reverse? 

Mr. SLANE. Absolutely not, Madam Chairwoman. 

Chairwoman STABENOW. Okay. I do have another question. I do 

want to say that, Dr. Slaughter, one of the things that you said 

was concerning to me if I heard correctly. You were saying that, 

as we all know, we have issues of intellectual property theft with 

China. This is no secret. There has been a huge issue in all kinds 

of industries, manufacturing and so on. 

But then you said the ideal solution to the problem of IP theft 

is this situation. Does that mean you think the ideal solution is for 

China just to buy all our companies and then they would have all 

our intellectual property? 

Mr. SLAUGHTER. No, Senator. My point is right now we know 

that hundreds of thousands if not millions of American jobs are lost 

because of IP theft in China. 

Chairwoman STABENOW. Right, but why is it ideal? Why having 

a Chinese company buying an American company the solution? 

That is the solution to IP theft? 

Mr. SLAUGHTER. So, around the world in lots of industries including the United States there is an active market around companies 

for the exchange of ideas. So, companies create ideas through their 

hard R and D and lots of different innovation efforts and the companies deploy those assets for themselves but a lot of times the motivation for M and A transactions across companies is precisely to 

gain ideas of others. So, having market mediated transactions like 

that is far preferable to theft. 

Chairwoman STABENOW. It is absolutely. I would suggest that 

following the rules is preferable to theft as well. So, let me ask one 

other thing before turning to colleagues; and that is, we have been 

told that Shuanghui wants to buy Smithfield because need more 

pork and want it sourced from the United States. 

But, if that were true, if that were true, American producers 

would be happy to do that today. Right now our pork producers in 

Michigan would be more than happy if they would be allowed to 

sell into China which they are not. 

Now, Smithfield is a unique situation as an integrated facility, 

business. But, we spent $23 million this year to promote U.S. meat 

exports but we cannot open the Chinese market. They use illegal, 

unscientific food safety standards to block both pork and beef. 

I am all about exports. As a member of the President’s Export 

Council, I want to see export our products; but it seems to me removing the unfair barriers from China would be a lot quicker and 

more efficient than just saying that the only way we can get in is 

if they own our company. That does not make sense to me. 

Commissioner Slane, I wonder if from your perspective if you 

might speak about this. 

14 

Mr. SLANE. Yes. Madam Chairman, this is really all about control, and the Chinese could easily go out and buy pork on the market. The problem with that is they subject themselves to huge price 

increases, and they learned in the iron ore and the coal business 

that it was better for them to buy the mines than to just buy the 

ore. 

So, here what they have found is that multinational, vertically 

integrated meat processing companies have a cost and price advantage. So, they have told their domestic industries like Shuanghui 

go out and find these companies and acquire them. This is all 

about trying to control the price of pork, and at the same time, 

they are getting the value added benefit by purchasing Smithfield. 

Chairwoman STABENOW. Thank you. I am over my time. 

Senator Cochran. 

Senator COCHRAN. Well, my reaction to the testimony of the last 

witness is that there are many more negative factors that should 

be considered by our Committee than positive ones if this merger 

or acquisition goes through. Is that inaccurate? 

Mr. SLANE. No. I would agree with that, Senator. I think the 

endgame, from the Chinese point of view, is to ultimately dominate 

our domestic pork market. They will take Smithfield’s technology. 

They will integrate it into China. 

They are converting from backyard hog production to industrial 

scale. They need the technology for manure handling, for genetics, 

for the meat cutting, that sort of thing. The history is that once 

they digest all of this and they get their industry up, then they will 

start to try to export their pork to us. 

So, I think their endgame is to ultimately dominate in the longterm. 

Senator COCHRAN. Well, if you were serving as a member 

of the U.S. Senate, would you consider this to be in the public 

interest of the United States or not? 

Mr. SLANE. No, I would not. There are four problems here as I 

see it in approving this transaction. The number one problem is 

that if this transaction is approved, how do you stop other Chinese 

companies from coming in and buying our food processing companies in the United States? 

For example, COFCO is the largest grain trading company in 

China, and they are a state-owned entity. They have publicly announced that they are seeking acquisitions of U.S. companies. 

So, if this transaction with Smithfield gets approved, I do not 

know how you stop other state-owned and state-controlled Chinese 

companies from coming in and buying our food companies. 

The second thing that offends me is they can buy our companies 

but we cannot buy their companies. And, you know, there is just 

something really fundamentally wrong with that; and I think that 

the endgame is to dominate our markets. That bothers me. 

The final thing is that what we are doing here, if this is approved, is you are importing a radically different economic system 

in a system in which we espouse free-market, and that is a potential for conflict, as I see it. 

For those reasons, I would be opposed. 

Senator COCHRAN. Do you know of anybody who is for it? 

Mr. SLANE. I am sorry, sir. 

15 

Senator COCHRAN. Do you know of anybody who is in favor of the 

transaction being approved? 

Mr. SLANE. Yes. 

Ms. HALEY. Two here. 

[Laughter.] 

Senator COCHRAN. You are outnumbered. 

Mr. SLANE. Mr. Pope has no choice, and I think Dr. Slaughter 

supports it. 

Senator COCHRAN. Well, I am going to give them an opportunity 

to tell us why this is in the public interest of the United States and 

why we should recommend approval, or do we have the power to 

decide as a political body of the United States that it should not 

be permitted to be approved. 

Mr. POPE. Senator, I hope you are not expecting me to tell you 

the powers of the U.S. Senate and the U.S. legislative process. I 

will leave that to you smart guys up there as I am just a meat 

processor in the business world. 

But, yes, I clearly am in favor of this transaction. I think it is 

good for America. I think this is the opportunity that America has 

been looking for to import jobs. 

There has been a discussion for the last 20 years about jobs 

being exported out of this country into China and things made in 

China and shipped back into the United States. 

This is the exact reverse of that, that is, China looking to another market to help feed its growing demand and realizing, as the 

other witness indicated, they have a protein shortage and Asia is 

likely to be protein short for a very long time. 

China consumes 50 percent of all the world’s poor production, 

and Asia consumes substantially more of the remaining, a substantial proportion of the remaining 50 percent. That is the area of the 

world where pork is the number one protein. Pork is number three 

in the United States. People in China eat substantially more per 

capita than they do in the United States. 

This is a wonderful opportunity for the U.S. to do what it does 

best which is to produce agricultural products that ship those 

around the world. This helps with the balance of payments and 

trade. This creates jobs. This creates opportunities for American 

farmers to grow. 

This seems like all the things, if you were writing down what 

would be positive, this is all the good things in life, what America 

is trying to do. So, thank you. 

Senator COCHRAN. Thank you very much. 

Chairwoman STABENOW. Thank you very much. 

Senator Brown. 

Senator BROWN. Thank you, Madam Chair, and I appreciate Senator Cochran’s line of questioning. 

For Mr. Pope and Commissioner Slane, do you think USDA 

should be involved in the CFIUS review of this proposed deal? 

Mr. Pope. 

Mr. POPE. We have absolutely no objection to that and support 

that process. 

Senator BROWN. Okay. Mr. Slane. 

Mr. SLANE. Senator, I would totally support that. It is one of the 

weaknesses of CFIUS. 

16 

Senator BROWN. One of the weaknesses is in that you do not expect that CFIUS will decide to include USDA in the process? 

Mr. SLANE. As you know, they are not included now so my hope 

is that they would become a permanent member of CFIUS and 

maybe some of the other agencies as well. 

Senator BROWN. Especially if it is a food safety issue? 

Mr. SLANE. Right. 

Senator BROWN. Mr. Pope, we know this is a good deal for shareholders. We know the long-term benefits for workers and farmers 

and I heard what you said to Senator Cochran’s question. But, the 

long-term benefits for workers and farmers and American consumers to me are not so clear but let me ask you something. Financially, what is at stake for you personally and for top management 

of Smithfield in this deal? 

Mr. POPE. I think we are on record and publicly, I think there 

is a public, in our preliminary proxy we filed what the benefits are 

to me personally and my senior management team. So, I certainly 

stand to benefit from this. I am a shareholder in Smithfield Foods 

and have been. I have been with the company over 30 years and 

have acquired the ownership shares that I have over a very long 

period of time. And so, the company has done well and so I do 

stand—— 

Senator BROWN. Could you be more specific whatever you said 

publicly and share that with the committee? 

Mr. POPE. I do not have those numbers right here in front of me 

but I will be glad, if it is okay with this Committee, I will be glad 

to make sure you get the exact accurate numbers. I will be glad 

to get that back to you. 

Senator BROWN. Could you give us a range? I cannot believe that 

you have not heard some of these numbers that will benefit you 

and other top management at least in some range that you could 

share with the Committee? 

Mr. POPE. Well, I certainly have, I certainly am a significant 

shareholder. So, my shareholdings, I am going to receive the $34 

a share that every other Smithfield Foods shareholder is going to 

receive; and as well, I have some equity awards that have been 

awarded over a very long period of time; and finally, I have got a 

retention. 

Shuanghui, in order to make sure that the management team 

stays in place, is putting in place retention agreements with our 

top executives to ensure that nothing changes. And, so those are 

payable over a three-year period and not payable if the management team does not stay. 

So, what I am going to alternately receive is still subject to the 

management team staying in place and continuing to run this company. 

Senator BROWN. All right. You said something, Mr. Pope, that I 

liked, the recognition that American business, it has almost become 

maybe the first time in economic history, as far as I can see, where 

the business plan of a large number of companies in one country, 

our country, has to shut down production in the U.S., move production to a foreign country, China, then sell back into the original 

country. 

17 

I do not know that has happened that I had seen in world history 

to any appreciable degree. You are saying that you are sort of the 

flip side of that. I am not sure that I quite follow that. 

But talk to us, and this question is for both Mr. Pope and Commissioner Slane. How likely is it that the adoption of Smithfield 

processing technologies will allow Shuanghui to export pork to the 

United States? 

Mr. POPE. Well, let me be—— 

Senator BROWN. I am sorry. Because what I am concerned of, as 

Chairwoman Stabenow is, of, you know, what can happen with the 

technology and that it does not create American jobs. It really goes 

the other way. 

So if you would discuss that and then Mr. Slane. 

Mr. POPE. Senator, I think that is a, the concern that so many 

have posed is what is the opportunity that Chinese product, which 

some consider to be of a lesser standard, are going to be imported 

back into this country. 

I was very clear in my testimony that this is all about exports. 

This is not about imports. In fact, Chinese product cannot be imported into the United States today and they had no plans and no 

applications in place and I have the highest respect for what the 

U.S. Department of Agriculture does in this country. 

In any event if any application was ever done, all of that product 

would be subject to USDA standards just as products manufactured in the United States are today. 

I would not suspect it would have the same level of scrutiny that 

our product have manufactured in this country today; but I want 

to be clear, there is no discussion about that. There is a huge protein deficit in that part of the world. So, this is not about exporting 

product from China to the U.S. It is about exporting U.S. product 

to China. 

Senator BROWN. Well, it may not be today but we have seen, this 

is a different issue but it is also not. We have seen the pharmaceuticals, contaminated pharmaceutical ingredients coming from 

China to the United States in the form of heparin and in death as 

a result. 

We have seen other kinds, just not the same kind of respect for 

food safety, drug safety, toys, paint, lead-based paint on toys all the 

kinds of back-and-forth sales from that country that have not observed the same kinds of standards we have. 

Mr. Slane, if you would comment on what Mr. Pope said. 

Chairwoman STABENOW. It has to be very short. 

Mr. SLANE. Yes. In the short term, you are going to see, you are 

not going to see any imports, and I think that the long-term 

endgame here is to dramatically increase production in China. The 

overriding principle of the Chinese is food security, and they do 

that through self-sufficiency. They do not want to be dependent 

upon a foreign country for their food. So, their endgame is to get 

their production up to a certain point. And historically when you 

look at steel, toys, paper, all kinds of other industries, they start 

overproducing and then they will start to export. 

Chairwoman STABENOW. Thank you very much Senator Roberts. 

Senator ROBERTS. Thank you, Madam Chairwoman. 

18 

Mr. Pope, Smithfield voluntarily agreed to undergo a review—I 

emphasize voluntarily—by the Committee on Foreign Investment 

in the United States, i.e., CFIUS, a marvelous acronym. 

At the time what were your expectations of the CFIUS review, 

and I would urge you to respond with regard to their very rigorous 

interagency review to determine the effect on National security. 

What was your expectation of this? 

Mr. POPE. Senator, we feel like we have a fully transparent process here and we are more than open to review by anybodies and 

any agencies within the U.S. government, and so we voluntarily 

did make the submission to CFIUS to ensure that they did the review, to ensure that there was not a National security issue associated with this. 

I do not want to opine in terms of how CFIUS is going to conduct 

that review. It is done in a confidential way, and they certainly do 

not share with me what they are thinking. Maybe you have a better understanding of that. 

Senator ROBERTS. Yes. I was going to say that really falls under 

our oversight responsibility. Perhaps that should be the focus of another hearing. 

Did you ever expect that the Senate Agriculture Committee, 

CFIUS two, would hold a hearing on the acquisition of Smithfield 

Foods and the CFIUS process? 

Mr. POPE. Is the question—— 

Senator ROBERTS. Did you expect that? I mean, did you expect 

that this Committee would hold a hearing on the acquisition? 

Mr. POPE. I do not know that I contemplated that, no. 

Senator ROBERTS. Did you realize you were the victim of a Chinese Communist plot? 

[Laughter.] 

Mr. POPE. Senator, to this moment I am not sure I understand 

I am the victim of a communist plot. 

Senator ROBERTS. The control of your company would somehow 

allow China to control the pork industry, were you aware of that? 

Mr. POPE. Senator, I was not aware of that. 

Senator ROBERTS. Well, they own our debt so, you know, you 

have got to be careful here. 

Given the high demand for safe and nutritious pork and pork 

products in China, which you have underscored and others have as 

well and even agreed to by the last two witnesses, what will be the 

impact on the acquisition for American pork producers and processors? 

I am talking about growth here. Can you be specific? How can 

others benefit from this? 

Mr. POPE. Senator, that is almost the cornerstone of the rationale for this transaction for America. The China, it is feeding the 

population with high quality products from the United States. For 

the U.S. producer, this is and opportunity once again to grow. 

We, as an industry, have struggled with growth in this country. 

Americans are eating less pork today than they were 15 years ago. 

So, without the opportunity to grow outside the United States, 

there is no opportunity for the U.S. pork producer to expand. 

19 

So, the U.S. farmer does not have an opportunity, does not have 

an opportunity to grow his business. This is it to the largest market in the world. 

Senator ROBERTS. If China is unable to buy American pork either 

through this acquisition or other means, where will they turn to 

meet their population’s demand for an additional high quality 

pork? 

Mr. POPE. Senator, they would look to, they can look to other 

countries. They could look to—— 

Senator ROBERTS. What countries? 

Mr. POPE. They could look to Brazil. They could look to Canada, 

potentially into Western Europe although pork production is very 

expensive in that continent. And so, the U.S. is the natural place. 

We have enormous respect and that is a compliment to the U.S. 

farmer. 

Senator ROBERTS. What about the consumer in regards to prices 

at the grocery store in regards to pork products? 

Mr. POPE. Senator, was the question about the U.S. consumer? 

Senator ROBERTS. American consumers. 

Mr. POPE. I do not expect there to be a significant impact of this 

on U.S. consumers because we have the ability to expand this business and meet that need. 

Senator ROBERTS. I have one question here for Dr. Slaughter. 

Welcome back. Moving beyond Smithfield in terms of the overall 

landscape for food and, to some extent, beverage companies, there 

has been a lot of talk about this setting an example and then we 

will have an avalanche of foreign investment here. 

Are there other iconic American brands and companies with foreign direct investment? If so, what are a few examples. 

Mr. SLAUGHTER. Sure, Senator. Think of automobiles, think of information technology. So, those are two industries that have long 

had a tremendous amount of inward investment into the United 

States and strong U.S. companies have undertaken a lot of investment outwards to the rest of the world. 

Senator ROBERTS. Maybe Chrysler and Fiat in Michigan? 

Mr. SLAUGHTER. Yes, great example. Think of the Apple iPhone 

that I have got in my briefcase. You know, designed by Apple in 

California, assembled in China is what it says right now. IT is a 

great example of an industry where the flow of ideas—— 

Senator ROBERTS. What about agriculture? We have three seconds here. 

Mr. SLAUGHTER. Agriculture as well. So, I was like from my 

hometown Cargill a great global engaged company that sells a lot 

around the world. 

Senator ROBERTS. Thank you. 

Chairwoman STABENOW. Thank you very much. 

Senator Johanns. 

Senator JOHANNS. Thank you, Madam Chair. 

Just an observation or two before I get to my questions. You 

know, one of the things that American agriculture is facing is that 

95 percent of the world’s population does not live here. They live 

someplace else in the world. 

You look at a market like China, it is a growing market, dramatically growing as a matter of fact, not only a lot of people but 

20 

as their standard of living continues to increase, one of the first 

things they will look to is a better food supply. So, they look to the 

United States. 

The other thing about China is that if there is a trade imbalance 

relative to agriculture, that is in our favor. We sell them more than 

they sell to us. Why? Because of some of the things that were mentioned today. 

I look at this transaction and I think, well, could they move production to China. Well, they have got a water problem, a very serious water problem. If they cannot get water, they cannot very well 

raise corn. 

I just think the problems of moving production are too great for 

China to overcome over the long-term. So, I do not see much possibility there. 

Could they move processing to China? Well, they certainly have 

a labor force but the product is here; and if they cannot raise the 

product in China, it makes more sense to come here, find the product, find the country where it can be grown. That is here in the 

United States. 

But, I think here is the problem that we are struggling with and 

the reality is, just to be very candid, there is not really a legal 

mechanism in place that really reviews this much or that could 

likely stop it. I appreciate you submitted to CFIUS. Quite honestly, 

the standard is such that there just is not much that can be done 

here. 

I suppose Congress could act; but if our experience with the 

Farm Bill is any indication, that is probably not going to work out 

too well. You know, the Senate might do something but you kind 

of wonder what would happen in the House. The House could do 

something, you kind of wonder what would happen in the Senate. 

But here is the problem in dealing with this transaction; I think 

for us and for the people that we represent. There is something 

really offensive about the reality that they can do this here but a 

very aggressive company like Smithfield, which has kind of redesigned pork production in the United States, could not do this in 

China. 

Mr. Pope, that is not a hard question. It is not. You know for a 

fact you could not do in China what they are doing here with 

Smithfield. The Chinese regulators would laugh at you if you said, 

well, I will just buy Shuanghui; and to us, that is just very, very 

difficult. 

So, how do we do something here that is realistic, that really gets 

to the essence of what I think our people are concerned about and 

that is; is the food supply going to be protected? At the end of the 

day, is China going to pick the Chinese versus America because 

they will now control what percentage of the U.S. pork production? 

It will be a very large percentage. 

So, how do we ensure our people back home that pork will be 

available, that it will be affordable? We will still have the kind of 

controls that I think they hope we will have. 

Mr. Pope, hard question for you. But how do I go back home and 

tell Nebraskans, do not worry, this is a good transaction for you? 

Mr. POPE. Senator, you are right. I know it is troubling with respect to the openness of the U.S. marketplace versus other counVerDate Nov 24 2008 08:31 Sep 15, 2014 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 C:\USERS\MW42035\DESKTOP\DOCS\87565.TXT MICAH
21 

tries in the world who have different approval processes. So, I will 

not speak to whether we could buy Shuanghui or not. I have not 

tried so I would just be speculating. 

However, I think there is an important thing here. We have a 

strong food safety program under the USDA, the HACCP programs 

we have inside our plans, integrity of the brands, and the sophistication of the management teams we have in place in these businesses. 

We are going to protect these brands and we are going to protect 

this in business. And, if we do not, the U.S. inspectors are going 

to do it anyway. 

This is a highly regulated industry. The U.S. government, tight 

inspection protocols are in place on every pound of meat we produced in every plant, and those on the agriculture Committee, you 

know that. You know how tight those inspection processes are. 

That is why people around the world take such comfort in the 

USDA stamp on product that they receive, and they are going to 

continue to have that assurance that anything, regardless of where 

the ownership is, this company has got to operate under the laws 

of the United States. 

We are not operating under the laws of China. We are operating 

under the auspices of the USDA and the food inspection process 

and our own developed HACCP programs beyond that. 

So, I think to your constituents back home, it is the same old 

Smithfield. Nothing is going to change. This is going to be an 

American company. We are going to continue to operate like an 

American company, and we are going to continue to protect these 

brands. 

The conversations I have had with those people at Shuanghui, 

this is one of the things that they are trying to buy. They want us 

to help them develop those food safety protocols and help to protect 

their food supply. 

Senator JOHANNS. Thank you, Madam Chairwoman. 

Chairwoman STABENOW. Thank you very much. 

Senator Grassley. 

Senator GRASSLEY. I am going to start with Dr. Haley and Commissioner Slane. Do you agree with Mr. Pope’s answer to Senator 

Robert’s question about the benefits of U.S. pork producers and 

processors to expand and to grow domestically as a result of this 

transaction? 

Ms. HALEY. No, I do not. I do not think Shuanghui is buying 

Smithfield for its pork. All of Smithfield’s production is about three 

percent of what China produces. Shuanghui is buying Smithfield 

for its brand name and to assuage the horrible reputation that 

China has so far as food production goes and exports of food. 

Smithfield has gene technology which is a strategically important 

industry for China. This acquisition is bolstered by indigenous innovation policies because China wants to move up into value-added 

production. Shuanghui already is in value added production as regards China. 

Senator GRASSLEY. So, now are you speaking to the point, 

though, that you think it will expand American production? 

Ms. HALEY. I think we will be producing more pork, a steady line 

of pigs will be going to China but I also think that there are going 

22 

to be other side effects. For example, competitors will now be dealing with a Shuanghui Smithfield that is as inscrutable as any 

other Chinese company, any sort of strategic information will not 

be made public, for example. It will go through that morass of Chinese dissemination. Competitors will be dealing with—— 

Senator GRASSLEY. I think you have answered my question and 

I would like to get Mr. Slane. 

Ms. HALEY. Okay. Sorry. 

Senator GRASSLEY. Then I want to get into some other things. Go 

ahead. 

Mr. SLANE. Senator, last year the Chinese consumed just under 

120 billion pounds of pork. They imported 1.5 billion pounds, a little over 1 percent. Smithfield exported 1.2 billion pounds of pork. 

Smithfield has the capability to supply the import needs of pork to 

make up the difference in the Chinese economy without any other 

U.S. pork producer participating. 

Senator GRASSLEY. It is my understanding four producers in the 

United States or processors control 74 percent of the market. So, 

I am always concerned about antitrust and competition issues. 

This would be to any of you that want to answer. Do you have 

any concerns that the transaction could increase anti-competitive 

and predatory business practices in the pork industry domestically? 

Ms. HALEY. Well, I think it is going to be very difficult for competitors because they are not going to be able, in this very tightly 

controlled industry, they are not going to be able to decipher what 

one major company is doing. Yes, it will. 

Mr. SLANE. Senator, how does an American company compete 

with a company, a Chinese company that has no cost of capital, 

that has enormous subsidies made available to them; and in effect, 

American companies are not competing with a Chinese company 

but with the Chinese government and they cannot win that competition. 

Ms. HALEY. That is right. And, the Chinese government has 

come out publicly and said that. They said we encourage those acquisitions which translated means we subsidize and facilitate those 

transactions. 

Senator GRASSLEY. Well, Dr. Slaughter, you had a different point 

of view in your testimony on that. You obviously disagree with 

them. I would like to have you convinced me when we thought a 

few years ago that the Chinese, whatever, CNOOC or whatever the 

oil company is should not buy Unical because we thought it was 

against our national interests, and maybe even our National security interest. 

Since food is such an important part of National security why 

this might not be a problem from that point of view. And you said 

that the Chinese government does not have much to do with this 

small, you said small company in China. 

Mr. SLAUGHTER. So, I think, first of all, Senator, I think that 

CFIUS’s review of this transaction is entirely warranted. I served 

on CFIUS, in fact, during the time of that particular transaction 

when I served in the government before. 

The interagency process works well in CFIUS. I think that this 

is a transaction, given its novel nature, where precisely a careful 

look at CFIUS makes sense. 

23 

Second, I agree a lot with what Commissioner Slane and Dr. 

Haley have said about the challenges of growing food in China. Although, I gently would disagree and say the major goals for the 

Chinese government here is to maintain social stability, given the 

demands of their population for safe and cleanly produced food. 

Senator GRASSLEY. So, you said you do not think the Chinese 

government had much to do with this company that is buying 

Smithfield; but on the other hand, the Chinese government is very 

concerned about social cohesion and all that sort of thing. 

So, how do you know they are not pushing the company to buy 

Smithfield and so the government has got an involvement in it, the 

Chinese government has and involvement in it? 

Mr. SLAUGHTER. So, the new leaders in China today have been 

very explicit about trying to have what they call more balanced and 

harmonious economic growth focused less on exports, more on 

meeting the needs of the households and families in China. And, 

I view this transaction as consistent with that effort to try to bring 

cleaner growth to China. 

Senator GRASSLEY. Thank you, Madam Chairman. 

Chairwoman STABENOW. Thank you very much. 

Senator Boozman. 

Senator BOOZMAN. Thank you, Madam Chair, and thank you and 

the Ranking Member Cochran for having this really important 

hearing. This is something we have all heard about for a while and, 

you know, we are concerned, the American public is concerned so 

it is good to have the discussion. 

I think all of us are really concerned that you have a huge company in the sense of controlling a good part of the market and then 

again what is that going to be the effect on consumers, what is that 

going to be the effect on the American worker is the bottom line. 

Tell me, Mr. Pope, my understanding of the reason that China 

wants to do this is in the sense that, as has been alluded to, they 

need protein. They need the pork. If right now they do not have 

the grain to do that over there, it takes four or five pounds of grain 

to make a pound of pork so it makes sense to raise the pork where 

the grain is at. Is that true? 

Mr. Pope. 

Mr. POPE. Senator, I think that is exactly true. That is not any 

different than the way that pork and meat is produced in this company. Meat is largely produced where the grain is and in China has 

had a policy of attempting, as many countries have, to be self-sufficient in feeding their population. However, I think they have concluded that is going to be a difficult process; and one solution to 

that is to import the product. 

Senator BOOZMAN. Again, like I say, I am just trying to understand their reasoning. So, they send it back, you know, in the sense 

a lot of it goes back, perhaps, I would assume it would. But again, 

our producers backfill what goes back theoretically and you sell 

more grain, you sell more pigs. Is that too simple of an understanding? 

Mr. POPE. Well, I think our producers—and some are in the room 

here today with me—have overwhelmingly supported this. The producers see this—— 

24 

Senator BOOZMAN. That is a good point. And again, I have visited 

with some of the large producers also. And, where are they at? I 

mean, are our large producers, small producers, are they for this 

or against it or? 

Mr. POPE. Senator, I do not believe that I have gotten any feedback from any producer who is opposed to this. They are overwhelmingly supportive of this. It is the opportunity to grow again. 

I do not know of any producer who is opposed to this today. 

Senator BOOZMAN. Mr. Slane, Dr. Haley, have you met with any 

of our producers? Do you know if they are for or against this? 

Mr. SLANE. I have not talked to any, Senator. 

Senator BOOZMAN. That would probably be a good idea. 

The other thing too is that began to me in the hearing we are 

drifting into all kinds of things. 

Dr. Haley, I share your concern with food safety; and yet if we 

are not doing a good job in that regard because we have got all 

kinds of stuff coming in here now; and again, I am not saying I am 

supporting or against it. I am just trying to find the information. 

But, there is a lot of product coming in here right now and we 

needed to do a better job of that than we do. 

Commissioner Slane, I do not understand in the sense, you know, 

that if your argument is that we should not do this, allow this to 

be done here because if we cannot do it over there. I mean there 

are countries that we deal with that we cannot buy property in and 

yet we allow them to buy property here. I mean, there are all kinds 

of other situations like that comes about. 

I have great fear of the Chinese, you know, as you are alluding 

to in the sense, I have traveled in Africa a lot and understand, you 

know, some of the methods that are used. But, apart from that, 

that is really not a very good argument, is it? 

Mr. SLANE. Only in the extent that we should have the same opportunity in these other countries to acquire their companies and 

there is just something fundamentally wrong economically in not 

allowing this. And, our commission recommended that CFIUS be 

modified in that we reject applications where we cannot buy that 

same company in that country. 

Senator BOOZMAN. Right. And again, I understand that and, like 

I say, to me that is kind of a separate deal in the sense that is a 

huge problem that we have got in many countries throughout the 

world. 

The other thing I would like to ask about, if you are knowledgeable, is I am told that as far as, you know, this being the rocket 

science as far as the pork production that it is pretty easy. 

I used to have a bunch of cows and, you know, worked the genetics hard that way. I mean, this is an industry that is a pretty stable industry that the access to genetics and things like that, if you 

want to obtain it, I mean, there is not a great mystery in the feed 

mix or this or that. Is that true or false? 

Mr. POPE. Senator, I think that, in terms of technology, I think 

essentially what we do, we do not have any patents. It is commercially available. 

Senator BOOZMAN. Thank you, Madam Chair, and began, thank 

you for having the hearing. I think this is very helpful. 

Chairwoman STABENOW. Thank you very much. 

25 

Senator Thune. 

Senator THUNE. Thank you, Madam Chair. 

I appreciate you all coming in and answering our questions. I 

think one of the issues with this acquisition, we are probably not 

going to see a month from now or a year from now any visible impact on the Nation’s livestock industry, our Nation’s food supply or 

food safety for that matter, but I think we need to look at these 

in terms of what the impact will be five years down the road, 10 

years down the road, how the Nation’s food supply might be impacted, our food safety might be impacted. 

You have 20 percent of the world’s population living in China. So 

obviously, food security is a high priority, especially since only 8 

percent of the world’s crop land is in China. China is going to have 

to look beyond its borders to ensure a steady and stable food supply. 

But, we have got to ensure that China’s food security and adequate supply does not come at the expense of ours here in the 

United States. 

I want to ask a question. Mr. Pope, you had mentioned, and I 

think the quote is, it will be the same old Smithfield only better, 

and that Shuanghui is committed to maintaining our operations, 

our headquarters, our relationships with producers, our labor contracts, and our quality brands with the highest reputation for food 

safety. 

I think we are all encouraged to hear that as Smithfield has been 

a great asset to the American food supply in the past decades. But, 

I am wondering if maybe you could elaborate on any assurances 

that have been given to business partners, producers, employees, 

consumers that Smithfield will be, in fact, as you put it, the same 

old Smithfield. 

Mr. POPE. Sure. Thank you, Senator. I would love to address 

that. Shuanghui has been very forthcoming in terms of their commitments in their public statements on the announcement of this 

deal of their commitment. 

So, they are well aware that this is a large acquisition going on 

in the United States, and they are well aware of the public overview and concern about this transaction. So, they are very knowledgeable and very thoughtful about what they are committing to 

realizing that they will be held accountable of that. 

The fact that the overwhelming support of so many different organizations and participants in the pork industry have come forward with this should give you some assurance that Shuanghui is 

going to live up to their commitments. 

I have known these folks for several years. They have always 

lived up to their commitments to us. They are the leader in their 

country. They are partnering with the leader and the largest pork 

producer in the world, with the largest pork consuming country in 

the world, with the largest processor in that country. The marriage 

is sort of very natural and very automatic. 

In terms of commitments, I am very grateful for the fact that 

people at the UFCW, the unions have stepped forward and said we 

understand. They are going to honor our contract. 

Our producers in the industry, of the hog of producing industry, 

many have stepped forward and said we salute this transaction as 

26 

well as many of our competitors in this industry have also come 

forward saluting this transaction as good for this industry for the 

long-term. 

I have got over 30 years with Smithfield, and so I have an enormous investment emotionally in this company, and I am going to 

make sure, I am still going to continue as the CEO of this company, and I am going to have a hand in the future in the way this 

company continues to operate, and I realize we are going to be held 

accountable to the scrutiny of the American public and the regulatory process in this country, and I am very comfortable. 

Shuanghui 100 percent endorses that; and in fact, the North 

Carolina pork producers just today were meeting with Chairman 

Wan in China and just put out a press release in the last few hours 

complementing their meeting with him and his commitment as the 

chairman of Shuanghui, the commitment to maintain the food safety standards that Smithfield has been placed today. 

So, as good as an assurance as anyone can have, they are making 

public statements on the record that they are going to maintain the 

management team and our operations and our food safety standards. 

Senator THUNE. Mr. Slane’s testimony identified Shuanghui as 

being a, and I quote, Chinese state-controlled company, end quote. 

In your testimony, you state that Shuanghui is a private holding 

company based in Hong Kong. 

Would you agree that Shuanghui is a state-controlled company? 

Mr. POPE. No, I would not agree, Senator, that it is a state-controlled company. I think that is fairly easy to research. So, I would 

just ask Mr. Slane to do the research and maybe he just got some 

bad information. 

Senator THUNE. Mr. Slane. 

Mr. SLANE. Chairman Wan is a high-ranking Member of the Chinese Communist Party and a 15-year veteran of the National People’s Congress. He was appointed to the position by the Chinese 

Communist Party and he answers to the Chinese Communist 

Party; and if he does not do what they say, they will remove him 

or worse. 

In addition, he controls the majority of stock and the voting 

rights of Shuanghui; and finally, Senator, and the Bank of China, 

which is controlled by the Chinese government, is financing the 

cash, the 4.7 billion, in this transaction. The Bank of China does 

not finance any transactions unless they are told to by the Chinese 

Government. 

By any definition, this is a state-controlled company. 

Ms. HALEY. May I add two more things as to why it is state-controlled? 

Chairwoman STABENOW. Very quickly. 

Ms. HALEY. Its subsidiary was listed on the Shenzhen stock exchange. You do not get a listing like that without some kind of 

state support. 

Several government people have come out and said openly that 

they support this acquisition. That does not happen unless there is 

something else going on, some other influence. 

Chairwoman STABENOW. Thank you very much. Thank you. 

Senator Heitkamp. 

27 

Senator HEITKAMP. Madam Chairman, I apologize for coming in 

and out. I had another significant meeting to my State and wanted 

a chance to listen to all the questioning, and I know that a lot of 

the ground that I wanted to cover has already been covered. 

I just have one quick question of Mr. Pope. You know, it is always good to get a lot of commitments on the front when you are 

negotiating a deal and when you want to make people happy and 

you want to come before a panel like this and say things are going 

to go well. 

But, what are the legal requirements that contracts be maintained, that all of the things that have been promised will actually 

come to fruition now and into the future or is this just part of what 

we are talking about now and tomorrow after the acquisition is finalized those commitments go away? 

Mr. POPE. Senator, many of those commitments that I made reference to our legally binding contracts under U.S. law. So, they 

have no choice but to honor the contracts we have with our union 

employees as well as the 2000 contracts we have with our contract 

growers. We have those in place and they have no choice but to 

honor those contracts. 

Senator HEITKAMP. No contract is permanent. So, what is the 

termination dates on those contracts? 

Mr. POPE. Obviously, Senator, those contracts have varying termination dates. But, the fact is that Shuanghui realizes that an 

important asset they are buying here is the management team in 

place, our employees in place, and the relationship we have with 

our growers and our suppliers. 

They would not be paying a 30 percent premium to the market 

without realizing that they are getting a valuable asset and the 

discussion that was being held earlier this year about the potential 

breakup of this company into parts by other interested parties created some of this interest by Shuanghui and other interested parties because of the value of his vertically integrated model. 

Senator HEITKAMP. Can you state with any legal certainty that 

in 10 years you can come back here and say contracts similar to 

the contracts that you have today with your growers will be in tact 

and that you will have union contracts in 10 years? 

Mr. POPE. Senator, obviously, it is difficult for me to project the 

future. However, as certain as I can be about anything, I am virtually positive we will have the contracts with our contract growers 

because we do not have a business without them. Our contract 

growers are, one of the most important assets this company holds 

is the ability to work with power producers. That is a key asset. 

Beyond the brands that the company owns, that is probably the 

second most important asset we have. 

The union, the relationship we have with United Food and Commercial Workers I would ask you to ask them themselves, they 

have come up so much supportive of this. They are highly confident 

that the company will continue to recognize them as the unions in 

place and have contracts that are favorable to their employees or 

to their workforce. 

Senator HEITKAMP. You know, not to belabor the point, but I 

think the concern here is that in anything like this that is going 

to have a fair level of controversy, as you can see, from the panel 

28 

today there is always a lot of commitments that are made and, you 

know, we like to envision that in 10 years we will come back and 

say we were right. It all worked out. And, I certainly hope that is 

the case. 

But, just be aware that there is a fair amount of cynicism and 

concern about this transaction, and part of that is borne out of concern for what is going to happen to the intellectual property of this 

company. 

As you have mentioned over and over again, the quality of the 

work that you do, the intellectual product, the know-how that you 

have, once that has been acquired as an asset of a Chinese company, will we then see that basically undermine pork production in 

our country. That is the concern. 

You know, this ground has been plowed and I thank the Chairwoman for having the hearing but again I hope in 10 years you are 

right. 

Chairwoman STABENOW. Thank you very much. 

I want to talk a little bit more about exports because a shining 

star for us in the United States is agricultural exports. We have 

for every 1 billion of dollars that we invest we have about 5000 jobs 

created. So, we have a surplus in terms of exports in agriculture 

which is very, very important. 

Pork is very export dependent. You need to export, and right now 

if China opened its doors and did not apply illegal and unscientific 

food safety standards, you could just export to them. Create a lot 

more jobs. I think that would be terrific. 

Other producers, independent producers that are configured differently than Smithfield could do that right now but that is not 

what we are talking about. 

My question is, now that Shuanghui will have access to Smithfield’s production technology and genetics and improved food safety 

practices, is it possible—I am sure they are going to increase their 

own efficiency. They said that is why they are willing to pay a premium for the company, and Japan sits right next door which is our 

largest export market from the United States. 

Why would China not export to Japan? 

Mr. Pope. 

Mr. POPE. Senator, that is a very good question, and certainly it 

is a concern that the industry has is Japan is a very important 

market for the pork industry, and you are right again about the 

importance of exports to the health of the pork industry. 

I like to say exporters have become the lifeblood of the pork industry; and when we do not have sizable exports, the industry suffers significantly as a result of that. 

Today, China could and does, and does, export into Japan very 

limited amounts. There are very, very tight food safety standards 

between, in Japan with respect to Chinese product; and so they 

have to have plant approvals. I am sure you and your staff know 

that. 

There has been very little but there is some. And so, the thing 

that gives me comfort is the economics. Pork is substantially more 

expensive in China than it is in the U.S. It probably surprises 

many people to hear that. Pork prices are 50 percent higher in 

China. It is not a cheaper market. It is a higher market. 

29 

They have an economic disadvantage in shipping to Japan because they do not have the grain. They have got to import the 

grain. The grain has got to be grown someplace else. It has to be 

shipped to China. They do not have anywhere near the productivity 

in their herds and so that the pigs do not stay alive. 

It is much more expensive for their economic disadvantage. And, 

the U.S. has an economic advantage in selling to Japan, and the 

deficit that exists in China today I think is a very real deficit but 

I think it is an opportunity for U.S. exports. 

I think they are looking, China is looking that this is an opportunity to feed their people, to satisfy the civil issue that they have 

got to solve in giving safe food to their people. It is not about an 

opportunity to import product and then exported back out to 

Japan. 

Chairwoman STABENOW. But again, Mr. Pope, they could feed 

their people by opening their markets to the great American pork 

products that we have, and of course, they have chosen, and I understand they would like your brand. It is an excellent brand. 

One of the concerns or questions I have is whether or not your 

brand which will be put on Chinese pork which has been less than 

stellar is going to be a problem for your brand down the road. 

But, I wonder if Dr. Haley and Commissioner Slane would like 

to talk about the economics of all of this. 

Ms. HALEY. Well, I do not think—as I said before, that China or 

Shuanghui bought Smithfield for the pork. Smithfield’s production 

is just 3 percent of Chinese production. But what I see happening 

is what is happening in other industries such as paper, steel, glass, 

solar. We spent the last five years looking at these industries. 

Higher value-added manufacturing will move to China; and by 

that I mean, processed products, and they will use the Smithfield 

brand name. We will continue to export pork, a steady stream will 

go on to China with all sorts of negative externalities such as pollution mounting, perhaps soy and other interrelated feed industries 

will have their prices going up as well. 

We will be exporting more pork but we will be importing more 

processed foods from China. So, we will be exporting more commodities as we have been doing. We currently import 560 percent more 

technologically advanced products from China than we export to it. 

So, we will be importing their processed foods and we will be exporting our commodity. And, as we will be importing more than we 

will be exporting, our trade deficit will continue to grow. 

China is not seeing this as just one acquisition. Shuanghui has 

government support. These going-out companies have government 

support and they see Smithfield as a foot in the door. There are 

going to be very many acquisitions in agriculture. I have spoken to 

people in China and this acquisition is being very carefully monitored. There are other companies that are waiting in the wings to 

buy more American companies; and so, this is a weighty decision 

and I think this really has to be looked at very carefully as to what 

we want to do with the agricultural sector in this country. 

Chairwoman STABENOW. Thank you. 

Commissioner Slane. 

Mr. SLANE. Senator, I think it is important to note that 

Shuanghui as production and distribution systems in Japan and 

30 

South Korea so they are obviously penetrating that market; and 

with the subsidies from the Chinese government, I think eventually 

long-term they could undermine U.S. exports to those markets. 

Ms. HALEY. Yes. 

Chairwoman STABENOW. Thank you. My time is up. If there are 

other members that have questions. 

Senator Thune. 

Senator THUNE. Thanks, Madam Chair. 

I just wanted to take advantage of Mr. Slaughter’s expertise 

while we are here and ask a question. I would like to hear, in your 

words, what you see as the long-term implications of the merger 

and acquisition on the American food manufacturing industry. And 

to be more precise, is this acquisition going to be a job creator for 

American workers? 

Mr. SLAUGHTER. Thank you, Senator. It has every potential to do 

so; and if I could echo Mr. Pope’s response to your question earlier 

about the long-term, the one dimension in which I hope he is wrong 

is that in five to ten years Smithfield does not have 46,000 employees in America, they have 56-or 66,000. 

Most of the growth in the world is outside of the United States. 

I will echo the Chairman Stabenow’s nice framing. The number I 

will give economically is 22 million. There are over 22 million 

under and unemployed Americans in America today. 

We need to try to create for the next five to ten years approximately 20,000,000 new jobs in America, and a lot of those jobs are 

ideally going to come from American workers and their businesses 

being connected to opportunities in world markets. 

Yes, there is a lot of legitimate concerns about the economic development of China but I think the engagement of China and the 

rules-based, transparent policymaking process is critical to try to 

allow American workers like those at Smithfield and throughout a 

lot of other industries to be connected to that growth in China. 

Senator THUNE. You, in your testimony, mentioned foreign direct 

investment in the long-term as being boom to the American economy. I am wondering if you see any situation in which foreign direct investment might be a detriment or be an untenable risk to 

the American economy. 

Mr. SLAUGHTER. So, anytime there is a foreign investment that 

raises a legitimate National security concern for America, that foreign investment should be looked at closely if not forbidden; and 

again, I think the CFIUS process has decades of being a well-run 

and well-managed process for reviewing those kinds of National security concerns. 

My thought in that interesting question is clearly individual 

transactions sometimes do not work well for the parties involved; 

but when you look at the clear historical records for America over 

the decades, inward foreign direct investment like this particular 

transaction has generated large benefits for American workers in 

the broader economy. 

Senator THUNE. Thank you, Madam Chair. 

Chairwoman STABENOW. Thank you very much. I think this has 

been a very important and very thoughtful hearing and very informative. I appreciate everyone being here today. 

31 

We have a number of issues that have been raised and I think, 

from my perspective I remain concerned about the adequacy of our 

government’s review process for these acquisitions of our food supply. 

I really believe this is a precedent-setting case. I am concerned 

when Dr. Haley talks about more waiting in the wings to come 

which just says to me that we need to be thoughtful on behalf of 

American consumers and producers in the broader economy to 

make sure that we are looking at the adequacy of the review process and what is in the best interest of our country. 

I want to remind the members that we are going to be with the 

Treasury Department, we are going to be going across the hall now 

to meet with those that are involved with this review process and 

we will have questions for them as well. 

Any additional questions for the record should be submitted to 

the Committee Clerk by five business days from today, that is 5 

p.m. on Wednesday July 17. 

This is important. I hope that we will continue to see a strong, 

robust pork industry in America and that I have no doubt that our 

standards will remain high in this country, and we certainly want 

all the right things to happen. But I think there are legitimate 

issues here about what this is all about and the long-term implications for what will happen to the industry. 

Thank you very much for joining us. 

[Whereupon, at 4:06 p.m., the Committee was adjourned.] 

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A P P E N D I X 

JULY 10, 2013 

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58 


87565.025
59 


87565.026
60 


87565.027
61 


87565.028
62 


87565.029
63 


87565.030
64 


87565.031
65 


87565.032
66 


87565.033
67 


87565.034
68 


87565.035
69 


87565.036
70 


87565.037
71 


87565.038
72 


87565.039
73 


87565.040
74 


87565.041
75 


87565.042
76 


87565.043
77 


87565.044
78 


87565.045
(79) 

DOCUMENTS SUBMITTED FOR THE RECORD 

JULY 10, 2013 

80 


87565.046
81 


87565.047
82 


87565.048
83 


87565.049
84 


87565.050
85 


87565.051
86 


87565.052
(87) 

QUESTIONS AND ANSWERS 

JULY 10, 2013 

88 


87565.053
89 


87565.054
90 


87565.055
91 


87565.056
92 


87565.057
93 


87565.058
94 


87565.059
95 


87565.060
96 


87565.061
97 


87565.062
98 


87565.063
99 


87565.064
100 


87565.065
101 


87565.066
102 


87565.067
103 


87565.068
104 


87565.069
105 


87565.070
106 


87565.071
107 


87565.072
108 


87565.073
109 


87565.074
110 


87565.075
111 


87565.076
112 


87565.077
113 


87565.078
114 


87565.079
115 


87565.080
116 


87565.081
117 


87565.082
118 


87565.083
119 


87565.084
120 


87565.085
121 


87565.086
122 


87565.087
123 


87565.088
124 


87565.089
125 


87565.090
126 


87565.091
127 


87565.092
128 


87565.093
129 


87565.094
130 


87565.095