US lawmakers got their first chance to debate a Chinese company's proposed takeover of pork processor Smithfield Foods Inc, with most expressing apprehension about the deal's impact on American food supplies, agricultural exports and cross-border transfer of sensitive technologies.

The Senate Committee on Agriculture, Nutrition and Forestry heard on Wednesday from two foreign-trade experts who said the purchase by Shuanghui International Holdings Ltd would be good for China and, in the short term, Smithfield shareholders and executives but bad for America's economy and consumers.

Smithfield CEO C. Larry Pope defended the deal, in testimony to the committee, saying his company would continue to adhere to strict US food-safety standards while expanding in China's important export market.

"We have a saying: It will be the same old Smithfield, only better," Pope said, reiterating his and Shuanghui's claims that what would be the biggest Chinese acquisition of a US company is all about boosting exports to help satisfy huge demand for pork in the world's second-biggest economy.

"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 do more of it," he told senators.

Pope also said the transaction stands to benefit US farmers and agriculture and that a Shuanghui-owned Smithfield would retain the Virginia-based hog processor's existing supply contracts; plants, management (including the CEO himself) and workers, including union contracts.

Before Wednesday's hearing, the North Carolina Department of Agriculture and Consumer Services and the North Carolina Pork Council commented about a recent joint meeting in China's Henan province with Shuanghui Chairman Wan Long. According to them, Wan reaffirmed his commitment to retaining Smithfield's management, operations and employee agreements, and to upholding company safety standards

Pope was questioned by one Agriculture Committee member about whether those commitments by both companies were binding or would "go away" after the deal is finalized. Pope said they were enforceable under US law and that Shuanghui would have "no choice" but to honor them.

That senator, Democrat Heidi Heitkamp of North Dakota, added: "There is a fair amount of cynicism and concern about this transaction and part of that is borne out of concern for what's going to happen to the intellectual property of this company."

That reference, also made by other senators, was to Smithfield's valuable technology, particularly in the field of hog genetics and breeding. But a committee Republican, Senator John Boozman of Arkansas, said fears of a loss of US competitiveness or control to a Chinese producer may be exaggerated.

Pork production is "a pretty stable industry", he said. "There's not a great mystery in the feed mix" or in hog genetics that would give China, through Shuanghui, a major advantage.

Boozman also dismissed as irrelevant the observation from some committee colleagues and hearing witnesses that an inversion of the deal - Smithfield buying Shuanghui - wouldn't be possible. The US government and American companies do business with many countries that don't reciprocate the United States' wide market access, he said.

"There is something really offensive about the reality that they can do this here but a very aggressive company like Smithfield could not do this in China," said Republican Senator Mike Johanns of Nebraska, who served as US agriculture secretary during George W. Bush's presidency. "Mr Pope, that's not a hard question; it's not. You know for a fact that 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'll just buy Shuanghui.'"

Daniel Slane, a member of the US-China Economic and Security Review Commission, testified on Wednesday that his panel - an arm of Congress that considers national-security implications of bilateral economic ties - hasn't taken a position on the Shuanghui-Smithfield deal. Slane, who is also an official with the pro-business US Chamber of Commerce, said the commission, however, has urged inclusion of reciprocity as a condition for any deal approval by the Committee on Foreign Investment in the United States, or CFIUS.

Barring the rare intervention of a US president, CFIUS, an interagency panel headed by the Treasury Department, alone has the power to block an asset acquisition by a foreign entity for national-security reasons. Some senators on the Agriculture Committee, led by Chairman Debbie Stabenow of Michigan, asked the Treasury Department last week to include the US Department of Agriculture and the Food and Drug Administration in CFIUS' scrutiny of the Shuanghui-Smithfield deal due to the potential impact on food safety and security.

Some senators on Wednesday questioned the rigor of the CFIUS process or its ability to assess big agricultural transactions.

"This is a precedent-setting case, and we owe it to consumers and producers and workers to ensure we are asking the right questions and evaluating the long-term implications," Stabenow said.

She also said concerns in China about feeding its people could be addressed by expanding US producers' access to Chinese markets rather than by trying to buy American companies.

"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 companies. That doesn't make sense to me," said the chairman, who also questioned Shuanghui's "economic motivation" in agreeing to pay a 31 premium to the market price with its $4.7 billion, or $34-a-share, offer.

josephboris@chinadailyusa.com

(China Daily USA 07/11/2013 page1)