Reuters recently reported that a “U.S. national security panel has cleared ChemChina’s $43 billion takeover of Swiss pesticides and seeds group Syngenta (SYNN.S), the companies said, boosting chances that the largest foreign acquisition ever by a Chinese company will go through.”
Several U.S. lawmakers wrote to Treasury Secretary Jack Lew this year asking for CFIUS to subject the deal to additional scrutiny over its impact on domestic food security. The U.S. Department of Agriculture also joined the CFIUS review, Reuters previously reported.
“It’s clear that China is looking at purchasing companies with food production expertise as part of a long-term strategic plan and a component of their national security. The fact that a state owned enterprise may have yet another stake in U.S. agriculture is alarming,” said U.S. Senator Chuck Grassley, chairman of the U.S. Senate Judiciary Committee, who is sponsoring a bill to permanently add the U.S. Department of Agriculture to the CFIUS review process.
Groups representing farmers have expressed skepticism over the takeover, which could result in a Chinese state-owned company becoming a major player in U.S. food supply. Two of those groups, Food and Water Watch and National Farmers Union released this statement in July:
Given the latest effort in an alarming trend of Chinese government-owned entities acquiring other agriculture companies, Food & Water Watch (FWW) and National Farmers Union (NFU) are urging the Committee on Foreign Investment in the United States (CFIUS) to block the proposed purchase of Syngenta AG by China National Chemical Corporation (ChemChina). In a letter sent to the committee today, the two organizations emphasized the need to regard food security as a component of national security, highlighting the dangers of a Chinese state-owned enterprise acquiring one of the world’s largest agrichemical and biotechnology seed manufacturers.
The proposed merger of ChemChina and Syngenta would also create a conflict in both approving and manufacturing seeds and agrichemicals, giving the post-merged ChemChina-Syngenta a significant commercial edge in accessing the Chinese market. In 2015, after Shuanghui International Holdings purchased Smithfield Foods, Smithfield controlled nearly all U.S. pork exports to China.
“The proposed ChemChina-Syngenta mega-merger further consolidates an already hyper-consolidated market for seeds and farm inputs, disadvantaging farmers everywhere,” said Food & Water Watch Executive Director Wenonah Hauter. “The Chinese government-owned ChemChina would have every incentive to raise prices on farmers and reduce the number of seed choices — affecting both farm incomes and food security in the United States and worldwide.”
By law, CFIUS is required to review foreign investment transactions to determine if they could result in control of any critical infrastructure that could impair U.S. national security. The U.S. is fortunate in its ability to feed consumers domestically and overseas, but global food insecurity could impact U.S. national security. The proposed ChemChina-Syngenta merger strengthens China’s control of the global food supply and food manufacturing, as well as its capacity to curtail global access to seeds and crop protection technologies. This could potentially disrupt the food security of other countries, including the U.S., the groups explain.
“Food security is essential to national security. Food shortages have contributed to political and security instability across the Middle East. With growing pressures caused by increased populations and climate variability, the U.S. must protect its food and agricultural resources by blocking any further control of food and agribusinesses by Chinese entities,” said Roger Johnson, president of NFU.
The letter identifies several national security concerns, including the proximity of Syngenta facilities to military installations, concerns about potential safety security risks at Syngenta’s chemical plants and the transfer of critical research and technologies — partially financed by U.S. taxpayers — to a firm owned by the Chinese government. The organizations requested that CFIUS recognize the unacceptable national security and food security risks, trade implications and competition loss that could result from this cross-border acquisition and reject the proposed ChemChina purchase of Syngenta.