ChemChina Inches Closer to Acquiring Syngenta

19 April 2017 Jane Robinson, Research Assistant, Global Food and Water Crises Research Programme

Background

The use of genetically modified (GM) foods is one potential answer to food insecurity as the global population continues to increase. GM foods are highly politicised as the global market faces concerns that there might not be enough food. The agricultural sector is predicted to face changed growing conditions in the next decade. GM foods could better withstand more challenging growing conditions. There are several potential deals in the agricultural sector, the most notable being the acquisition of Syngenta, a leading Swiss GM food and pesticide company, by China National Chemical Corporation (ChemChina). The US$43 billion ($56 billion) deal has gained antitrust approval from the US and the European Union. These approvals remove another hurdle and bring the deal on acquiring Syngenta closer to completion.

Comment

The impending global food crisis is set to worsen over the next decade. As the world population increases and becomes more affluent, there is a growing consensus that there will not be enough natural resources to support the population. There is particular concern over the future of food security, and one potential solution is GM foods. In recent years, scientists have been debating whether GM crops can ease the global food crisis, and help prevent food shortages.

The role that GM foods will play in easing the food crisis, however, cannot be predicted. The global agricultural market could be altered by potential deals including the merger of Dow Chemical with DuPont and Bayer’s plans to merge with Monsanto. It comes as no surprise that ChemChina’s potential acquisition of Syngenta is receiving the most attention as it could greatly alter Chinese, and global, food security. India is home to the next, and last, regulatory body required for the deal to be completed. As India is the second-largest producer of cotton globally, and Syngenta offers crop protection products for its cotton, the deal could have strategic implications for the country.

ChemChina’s acquisition of Syngenta will likely face a serious backlash in China with concerns about its ability to handle the project. The deal has not been well-received as the population seems wary of any increase in the utilisation of GM crops after a number of food scandals. In the past decade, a number of food scandals have resulted in the death or hospitalisation of hundreds of thousands of Chinese consumers. China has yet to lift the ban on the cultivation of GM food, but this is tipped to change with the acquisition of Syngenta.

The flow-on effects of the deal, should it go ahead, will be felt internationally. Syngenta seed products include cereals, corn, rice, soybeans and vegetables. The potential deal has been well noted by the US, and rightfully so, as one quarter of Syngenta’s sales are in North America. The acquisition would have significant national security implications for the United States. Nonetheless, the deal was cleared by the Committee on Foreign Investment, and was granted US National Security approval in August 2016. The fact that national security concerns are still being raised is alarming.

With the proposed closing of the deal by the end of June, the future may be quite bleak for an already wary China. Syngenta owns a large portion of the global agricultural sector, and its GM products are on the market in Australia. Food Standards Australia New Zealand approves food ingredients imported from overseas and Syngenta products have been approved for use in Australia for some years now. The deal will be likely to have an impact on the Australian food market. It is undeniable that the state-owned ChemChina will have flow-on effects for food security that will reach beyond international borders.

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