|Loose business and environmental regulations, especially in red states, which have made the U.S. an increasingly attractive place for foreign companies to offshore costly and harmful business practices.|
March 26, 2018 | By Doug Bock Clark
In July 2013, Larry Pope, the CEO of Smithfield Foods, the largest pork producer in America, was called to testify before a U.S. Senate committee about the pending sale of his company to a Chinese conglomerate now known as WH Group. The $7.1 billion purchase, the largest-ever foreign takeover of its kind, had attracted concerns. The Chinese pork manufacturer had a checkered health record, allegedly feeding its hogs illegal chemicals, and Smithfield had a long history of environmental problems at its farms, including a $12 million fine for several thousand clean-water violations. But the worries did not stop there. The Chinese government had a track record of using nominally private entities as proxies for state power. "To have a Chinese food company controlling a major U.S. meat supplier, without shareholder accountability, is a bit concerning," said Republican Sen. Chuck Grassley. "A safe and sustainable food supply is critical to national security. How might this deal impact our national security?"
In a measured Southern drawl, Pope explained that the deal was a win for everyone. Pork markets were declining in America, while China had become the largest pork consumer in the world. The takeover would create jobs in rural America by opening a vast market. When senators pressed Pope about whether the takeover was being directed by the Chinese government, the executive laughed it off. He promised both companies would respect the health of the communities and the environment surrounding hog farms. A few months later, the deal was approved.
Questions soon emerged about the transaction. China's national economy is directed by Five-Year Plans, economic blueprints handed down by the government that private companies are expected to follow. In 2011, as the nation's billion-plus citizens continued to forge a stable middle class of pork consumers, the government issued a plan directing Chinese companies to buy foreign food producers and farmland. In two years, Chinese nationals went from owning $81 million worth of American farmland to nearly $1.4 billion, including the Smithfield purchase. Despite Pope's denials of Chinese-government involvement, the nation's central bank had approved a $4 billion cash loan to fund the acquisition, a transaction its 2013 annual report described as a "social responsibility." The investigative news organization Reveal uncovered documents showing that WH Group receives guidance from the government, which a company executive explained was because "pork is considered a national-security issue in China." When a reporter from Reveal confronted Pope with the financial documents showing the Chinese government's support for the deal, the first thing he said was "Wow." (Keira Lombardo, Smithfield's senior vice president of public affairs, contested the characterization that the Chinese government directed the purchase.)
Today, Smithfield sends more than a quarter of its pork abroad, especially to China, which received nearly 300,000 tons in 2016. Part of what made the company such an attractive target is that it's about 50 percent cheaper to raise hogs in North Carolina than in China. This is due to less-expensive pig-feed prices and larger farms, but it's also because of loose business and environmental regulations, especially in red states, which have made the U.S. an increasingly attractive place for foreign companies to offshore costly and harmful business practices.
America's top hog-producing county is Duplin County, North Carolina, where future hams outnumber humans about 30 to 1. In this rural expanse of sandy fields and loblolly pines, about 2 million pigs are warehoused in hundreds of football-field-size metal barns – about 2,450 pigs per square mile. All those pigs produce a tremendous amount of waste. A mature hog, whose only activity is to eat, excretes about 14 pounds of manure a day, which means Duplin's hogs generate about 15,700 tons of waste daily – twice as much poop as the human population of the city of New York, according to Food and Water Watch.
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