An Urban's Rural View

The problem with allowing Smithfield Foods' acquisition by China's Shanghui International Holdings isn't food safety or loss of technology or even foreigners controlling our food supply. The governmental review committee that just OK'd the acquisition was right to dismiss those concerns.

The problem is our government's failure to use the approval as a negotiating ploy. We're giving the Chinese something they want. Why don't we demand something in return?

We never do, alas. Reciprocity isn't part of the mandate of the Committee on Foreign Investment in the United States, or CFIUS. It looks only at the national security implications of foreigners buying American assets. If it finds none, it approves the deal, oblivious to the potential to swap the approval for a lowering of barriers American firms face in the home country of the acquiring company. That's what the law says it should do.

Is the review set up this way out of devotion to the rule of law, lack of imagination or just plain incompetence? Some of each, arguably. What's unarguable is this: Ensuring American companies get a fair shake in the Chinese market is important to our economic future. Not using the leverage we've got to win that fair shake makes no sense.

Of the many issues opponents of the Smithfield acquisition raised, the one with real force is lack of reciprocity. Why make it easier for Chinese companies to invest in our market when American companies are restricted from participating fully in a variety of industries in China, including such agricultural fields as originating grain, selling seed and conducting biotech R & D?

Food security, by comparison, is a red herring. Whoever owns Smithfield, it will have to operate in the U.S. under American laws, to the satisfaction of American inspectors and American consumers and with the understanding that in this market, at least, one bad mistake on the part of a meat packer can tarnish a brand's reputation forever.

Loss of Smithfield's technology is a similarly overblown concern. As American high-tech companies have learned to their distress, it's nearly impossible to keep advanced technology from developing countries: Whether by reverse engineering, licensing or outright theft, they eventually get it.

(The U.S. did. As an article in Bloomberg (http://tiny.cc/…) noted last February, "In its adolescent years, the U.S. was a hotbed of intellectual piracy and technology smuggling, particularly in the textile industry, acquiring both machines and skilled machinists in violation of British export and emigration laws.")

At least in this case Shanghui is paying for the technology -- a cool $4.7 billion.

As for foreigners controlling parts of our food supply, they've been doing it for years without Americans caring much. The Dutch company Unilever owns Hellmann's Mayonnaise, Good Humor and Ben & Jerry's Ice Cream. The Swiss company Novartis owns Gerber baby food. Don't even get started on all the American food the Swiss company Nestle controls.

However you look at it, Americans won't be worse off if a Chinese company owns Smithfield. But we'd be better off still if our government had said to China, "We're doing one for you. What are you going to do for us?"

The Chinese takeover could still fall through. A competitive offer from a domestic group may be in the works. If that happens, a bidding war could ensue, with unpredictable results.

But if Shanghui ends up prevailing, the U.S. will have missed an opportunity. For American companies to thrive in the decades to come, they'll need full access to China's enormous and growing market. Whenever we give China access to our market, we ought to demand a quid pro quo in theirs.

Urban Lehner can be reached at urbanity@hotmail.com