Ag Policy Blog
Chris Clayton DTN Ag Policy Editor

Monday 09/09/13

On Foreign Trade, U.S. Pork and Chinese Chicken

I'm back from Argentina and recovering from the high levels of both red meat and red wine they have in the country. I sampled way too much of both. For Americans, the exchange rate was gracious.

More on that later.

While in Argentina, I saw a lot of social media exchanges about food, the U.S. and China. It turns out, the Committee on Foreign Investment in the United States last week approved the sale of Smithfield Foods to Shuanghui International. All that remains to close the deal is a vote by Smithfield investors later this month.

Like much everything else going on in government these days, the Committee on Foreign Investment doesn't have to be transparent about how it makes its decisions. There were no open hearings, for instance. Senate Agriculture Committee Chairwoman Debbie Stabenow, D-Mich., drove that point home in a news release Friday. "Because this review includes issues of national security, it is done in secret with no public oversight or transparency," her statement said.

“It remains unclear what factors the Committee took into account in making its decision," Stabenow said."We still do not know if the potential impact on American food security, the transfer of taxpayer funded innovation to a foreign competitor, or China’s protectionist trade barriers were considered. It’s troubling that taxpayers have received no assurances that these critical issues have been taken into account in transferring control of one of America’s largest food producers to a Chinese competitor with a spotty record on food safety. The Senate Agriculture Committee will continue examining the effectiveness of the review process for acquisitions such as this and take steps as needed to protect American interests in future transactions.”

Smithfield and Shuanghui International have argued from the beginning that the sale will boost U.S. exports of pork to China. Pork producers connected with Smithfield have largely been positive about the prospects.

Let me hit that one home one more time: A pillar of the American meat industry will now be part of a Chinese conglomerate because it could be a way to get more pork exports into that market.

In a separate, yet related situation, USDA at the end of August announced the department was lifting its long-term ban on processed chicken from China. This action caught the attention of just about every American mother I have befriended on Facebook.

In the world of expanded global trade and food production, USDA is allowing companies to export raw chickens raised in the U.S. or Canada to be sent to China. Those chickens would then be processed into food such as chicken strips, nuggets and the like and then be exported back from China into the U.S. So the average round-trip U.S.-to-China chicken nugget would have roughly 11,000 frequent-flier miles just crossing the Pacific Ocean before it lands on your kid's plate at lunch. Maybe such chicken needs a carbon-emission seal of approval.

As part of this important trade development, Chinese chicken facilities will be responsible for providing American importers with the source verification that guarantees all processed chickens would be of American or Canadian origin. It would be inappropriate to imply at this time that possibly significant errors could enter into the source-verification process.

The beauty of the entire Chinese chicken scenario is that World Trade Organization policies, domestic politics and the grace of silver-tongue meat lobbyists have assured the American public that there will be no need for country-of-origin labeling requirements on these Chinese chickens. After all, mandatory country-of-origin is simply an ineffective marketing tool that disrupts the food supply. Such measures of precaution such as import labels won't be necessary until the first voluntary recall due to an unfortunate trans-Pacific mishap may occur over ingredients, sanitary measures or the desire of someone to make more money at the expense of food safety.

In other words, it's all good.

There does remain a troubling element, however. We understand that there is extensive Chinese demand for more meat protein in their diets, so much so that America's largest pork processor will now have Chinese owners to help ensure effective flow of product to that country's ports. Yet, China will graciously export such products to help feed Americans instead? How is it conceivable that the Chinese market would forego a certain percentage of processed chicken markets that clearly could find a place on the shelves of domestic retailers in Chinese communities? Apparently, there is no Chinese market for chicken nuggets.

Perhaps that is why USDA signed off on the America-to-China-back-to-America Chicken memorandum of understanding just before announcing the current level of food insecurity in the U.S. With 14.5% of U.S. households suffering some form of food insecurity, any food is deemed as good food. Processed chickens from China could come with a retail discount, which many low-income Americans will embrace once the House of Representatives completes its work cutting food-aid benefits.

But that 14.5% figure stands out. If that carries over into the full U.S. population, then roughly 47 million Americans are food insecure. China certainly has been a global economic driver in recent years. They have more money to buy pork, obviously. But there remains the question about how many Chinese households might fall into the food insecure category. If it were, say, 14.5%, that would be roughly 232 million food-insecure Chinese who might benefit from American chicken imports processed domestically.

Call me crazy, but somehow I think the level of food insecurity in China might still be higher than in the U.S. despite China's impressive economic growth. Speaking for American humanitarians, I think we should just allow China to keep the processed chicken products for now.

There could be a quid pro quo involved in the platinum-flier status chicken nuggets. China has banned U.S. beef for more than a decade because of bovine spongiform encephalopathy. The potential is that China could reopen that vast market for beef by providing opportunity that could come from feeding our kids processed chicken from a country where safety standards are an evolving concept.

Follow me on Twitter @ChrisClaytonDTN

Posted at 7:54AM CDT 09/09/13 by Chris Clayton
Comments (4)
It iss time for the US producer to put their foot down and ask the US consumers to support an all out boycott of all Smithfield products .We have always been able to feed ourselves without Chinas help.
Posted by melvin meister at 4:40PM CDT 09/09/13
Is it possible? The government is implementing a long term plan in order to afford the food program, once the "farm portion" of the Food Security Act in this nation is scrapped. After all, the mission of the"Food Bill" is to guarantee an adequate food supply at an affordable price. I know it sounds crazy, but read history throughout the world. Then put the smaller puzzle pictures together.
Posted by Bonnie Dukowitz at 6:28AM CDT 09/10/13
Brilliantly researched and brilliantly expressed!
Posted by H. Clay Daulton at 12:17PM CDT 09/13/13
Brilliantly researched and brilliantly expressed!
Posted by H. Clay Daulton at 12:18PM CDT 09/13/13
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