Trump push to keep meatpacking plants open comes as pork producers profit from China trade deal

WASHINGTON – President Donald Trump's executive order this week requiring American meatpacking plants to stay open during the coronavirus pandemic is raising new questions about the United States' massive meat exports, particularly the export of pork to China.

Trump's order was meant to prevent what meat processors have claimed is an imminent breakdown in the nation's food supply chain, resulting from the closure of several major meat processing plants that had become hotbeds for coronavirus infections. The president invoked the Defense Production Act, a law intended for wartime usage, to designate the meatpacking industry as part of the nation's "critical infrastructure."

Since it was signed late Tuesday, the order has drawn outcry from workers rights activists and effusive praise from the meat industry. Unions said it gave plant owners a green light to ignore worker safety if it interferes with a plant's ability to stay open and avoid liability if workers get sick or die.

"These are essential workers, they're not sacrificial lambs," said Stuart Appelbaum, president of the Retail, Wholesale and Department Store Union, which represents between 10,000 to 15,000 poultry workers in the South and Midwest. He said states are now stripped of the power to close a plant for deep cleaning, a move that helps stop the spread and keeps workers safe. 

"People should know when they are going to work, they are working in a safe environment. You have to prioritize the American people, not the product," he said.

The order has highlighted a debate inside the White House over whether to limit exports of pork to China, and what the president decides could have major implications for other U.S. exports. Previous DPA orders during the coronavirus crisis have required that makers of essential equipment in short supply to limit exports for the duration of the national emergency. 3M, which makes masks, is the most visible example. 

When it comes to the meatpackers, there are no such limitations. Through February, pork and pork variety meat exports accounted for 31% of all U.S. production, according to the U.S. Meat Export Federation. Just over one-third of those exports went to China.

On Wednesday, Trump held a private call with major meat industry CEOs, where he was asked about the prospect of export limits on meat, given that an imminent shortage for U.S. consumers was the justification for the executive order.

Trump responded that he is not interested in restricting exports at this time, according to current and former White House officials who requested anonymity to describe a private call. 

Still, there are some in the White House who are pushing for tighter export restrictions on meat, a former administration official told CNBC.

The question comes down to priorities, said Anthony Rapa, a partner in the Washington office of Kirkland & Ellis, where he works on trade and national security issues.

"Do we drive towards maintaining full capacity and keep everything as it is, with the U.S. having a healthy export market?" he said. "Or do we try to strike a different balance because of an emergency, and we only do what's necessary for us domestically?"

A decision to restrict meatpackers to serving only the U.S. domestic market during the pandemic could also be the one that best protects workers, advocates say.

The Trump administration's internal debate over meat exports comes at an especially difficult time for the U.S.-China relationship, as the two countries trade accusations over who is responsible for the severity of America's coronavirus epidemic. 

Trump has recently tried to shift the blame for his administration's slow response to the pandemic onto China, where the novel coronavirus was first identified in December. 

On Thursday, The Washington Post reported that White House aides are debating various ways to punish China for allegedly withholding early reports of the virus' spread through the city of Wuhan.

But when it comes to restricting meat exports, Trump faces pressure from an industry that doesn't want its revenue streams restricted. He must also weigh the potential damage an export restriction could do the U.S.-China trade deal Trump signed in January.

Paving the way for more American pork exports to China was a key component of the landmark deal, which remains the crown jewel of Trump's trade-focused foreign policy agenda during his first term. As part of the U.S.-China trade deal, China agreed to buy $12.5 billion in agricultural goods this year from the United States, and another $19.5 billion in 2021. But the correlation between how much U.S. pork is exported to China, and how much is left for American consumers, is not as clear cut as it seems.

Some U.S. pork processing facilities make a product specifically for Chinese consumption, while others export whole hogs, effectively skipping much of the actual processing that goes into producing muscle cuts for grocery stores. Export of U.S. pork to China has soared since the 2018 swine flu epidemic devastated China's domestic pork supply. 

And a Chinese company owns one of the United State's largest pork producers, Smithfield Foods, which it acquired through a $4.7 billion deal in 2013.

Maintaining America's capacity to process meat for export to China and other countries also has ripple effects all the way down the supply chain. In recent weeks, many of the nation's meat farmers have been forced to euthanize animals after the meatpacking plant closures left them with nowhere to ship their mature livestock. New animals are being born all the time. 

Moreover, restricting pork exports to China for the duration of the pandemic would likely be deeply unpopular with both the U.S. meat industry and the Chinese. But if the president does nothing, and continues to permit roughly one-tenth all U.S. pork to be sent to China every month, there could be other pitfalls.

The U.S. Department of Agriculture and the U.S. Trade Representative didn't respond to requests for comment. Friday morning, Trump retweeted a White House tweet from Thursday that touts the order. He also boasted of his efforts on behalf of American farmers.

Trump's executive order came just days after billionaire John Tyson, chairman of the nation's largest meat processor Tyson Foods, took out a full-page ad in several of the nation's most-read newspapers, warning ominously that "the food supply chain is breaking."

"There will be limited supply of our products available in grocery stores until we are able to reopen our facilities that are currently closed," Tyson wrote. The ad was widely picked up by news outlets who echoed Tyson's alarm, despite monthly reports from the Agriculture Department that showed no real danger to the nation's meat supply. 

The first time Trump mentioned the issue was on Tuesday, when the president answered a reporter's question by saying, "We're working with Tyson," and adding that he would be signing an executive order that would "solve any liability problems, where they had certain liability problems, and we'll be in very good shape. We're working with Tyson, which is one of the big companies in that world."

Tyson temporarily closed five of its plants because of coronavirus infections. A Washington Post investigation found that a number of counties with the highest per capita infection rates in the nation are home to Tyson plants. On Friday, the company said it would reopen its Logansport, Indiana, plant with limited production next week, adding that it is taking "additional precautions to reassure team members that they are returning to a safe work environment."

Tyson Foods spokesman Gary Mickelson said the company has taken a range of safety measures to prevent the virus' spread. He said it is screening employees' temperatures, installing walk-through thermal body scanners and asking some workers to be social distancing monitors. He said the company has put up tents outside of some facilities to provide more space during breaks. And he said Tyson has worked hard to find and provide surgical masks for workers, even chartering a plane to China to get them.

On Thursday, the company said it will open on-site clinics at some plants with a health-care provider, Matrix Medical Network. The clinics will be able to do testing for Covid-19 and help do health screenings and answer questions for employees.

With plant closures, he said there "may be some products that become less available, but the government's decision to invoke the DPA will certainly help mitigate that risk."

Smithfield, the Chinese-owned pork producer, indefinitely shut down one of its U.S. plants in South Dakota in mid-April. The Sioux Falls facility is one of the largest pork processing facilities in the country and represents 4% to 5% of U.S. pork production, according to the company.

The 3,700-worker facility was closed after two workers died and 783 others tested positive for the coronavirus.

Around the same time, Smithfield also shut down a plant in Wisconsin for two weeks and another in Missouri indefinitely. The Wisconsin plant processes dry sausage and bacon, and the Missouri plant produces spiral and smoked hams. The company said in a statement that the plants are near urban areas with community spread of Covid-19 and they've had employees who have tested positive. It said the Missouri facility can't run without raw materials from the Sioux Falls plant that's closed.

On Friday, Smithfield said it was suspending operations at an Illinois plant after workers tested positive. The company said the Monmouth, Illinois, plant represents about 3% of the U.S. fresh pork supply.

But it remains unclear how widespread a potential meat shortage is, or will be. Grocers said they haven't seen signs of a shortage, although they're monitoring the situation closely.

Some have taken proactive steps by limiting customers' purchases, working with processing plants to divert what would have gone to restaurants and forgoing certain meat items that require more processing, such as marinated or thinly cut meats. 

Kroger, the nation's largest supermarket chain, added purchase limits on ground beef and fresh pork, but a company spokeswoman said "there is plenty of protein in the supply chain."

"We feel good about our ability to maintain a broad assortment of meat and seafood for our customers because we purchase protein from a diverse network of suppliers," company spokeswoman Kristal Howard said.

This week, Texas grocer H-E-B added new limits for customers' meat purchases to prevent stockpiling. Company spokeswoman Mabrie Jackson told CNBC that the grocer was more concerned that panic-buying, rather than supply chain challenges, might lead to shortages.

Target hasn't seen an impact on its supply of meat, spokeswoman Angie Thompson said.

"We are in close, daily contact with all of our vendors to understand what is happening with their operations and currently do not have any concerns about material supply issues," she said.

At Stew Leonard, a small supermarket chain in the Northeast, meat aisles remain well-stocked. CEO Stew Leonard Jr. told CNBC he does believe there may be some shortages, since meatpacking plants that have cut capacity as they space workers out on the assembly line or have some sick workers.

He said the grocery chain buys direct from a lot of smaller meat producers rather than large ones, such as Tyson, and they don't expect to be affected. 

He urged shoppers not to worry. "Don't panic," he said. "There's going to be plenty of food."

But while meatpackers like Tyson and Smithfield applauded Trump's executive order, critics said it runs roughshod over workers rights. 

"Sending employees back to work with no mandatory protections in place to protect them from being exposed to Covid-19 and no recourse to address unsafe work environments threatens the lives of meat processing plant workers, as well as the long-term viability of the food supply chain," said Rep. Alma Adams, D-N.C., the chairwoman of the House subcommittee in charge of worker protections.

"Our workforce deserves better: mandatory life-saving PPE to protect against COVID-19, and unprecedented protections for workers. Otherwise, these conditions aren't safe for American workers or consumers," Adams said in a statement Wednesday to CNBC.

Labor unions said the government must strengthen safety measures for workers whose health is critical to the supply chain. The United Food and Commercial Workers union represents about 250,000 food processing and meatpacking workers across the U.S. and Canada, including many of Smithfield's plants. 

In an interview with CNBC, UFCW president Marc Perrone said meatpacking workers need high-quality protective gear, such as N95 respirator masks, and plants must be reconfigured to allow six feet of social distance in addition to any Plexiglass barriers. He said workers must have expanded access to both diagnostic and antibody testing, too.

He said the facilities are like "stationary cruise ships," with workers standing elbow-to-elbow, lining up in hallways and eating lunch in large cafeterias. Workers can't be easily replaced because their roles require training and many plants are in rural areas, he added.

Without stepped-up safety measures, Perrone said, workers will keep getting sick and the executive order won't be enough to keep them open.

"If 20% of the workforce is sick, you can't run the plant," he said.