Sugar industry pours it on after CAFTA's bitterness

U.S. sugar producers, for years one of the most powerful lobbying forces in agriculture, suffered a bruising defeat in 2005 when Congress approved the Central American Free Trade Agreement (CAFTA) over their strenuous objections.

U.S. sugar producers, for years one of the most powerful lobbying forces in agriculture, suffered a bruising defeat in 2005 when Congress approved the Central American Free Trade Agreement (CAFTA) over their strenuous objections.

CAFTA allowed a limited increase of sugar imports to the U.S. from Central America, but domestic producers saw it as the beginning of the end for Big Sugar. Less than 18 months later, however, the industry appears stronger than ever in Washington, with longtime congressional allies in key positions of power on several House and Senate committees.

Most notably, Rep. Collin Peterson (D-Minn.) is the new chairman of the House Agriculture Committee. Peterson's district covers the Red River Valley, which runs along the border of North Dakota and Minnesota and includes much of the nation's sugar beet production.

Besides Peterson, sugar supporters include Senate Budget Committee Chairman Kent Conrad (D-N.D.), Senate Finance Committee Chairman Max Baucus (D-Mont.) and Sen. Byron Dorgan (N.D.), a member of the Senate Democratic leadership. Senate Agriculture Committee Chairman Tom Harkin (D-Iowa) has also always supported the sugar program, according to Kevin Price, director of government affairs for American Crystal Sugar Company, which operates five refineries in the Red River Valley. "I'm optimistic we'll get good sugar provisions in the farm bill," said Rep. Charlie Melancon (D-La.), a former president of the American Sugar Cane League.

American Crystal is one of several groups representing the U.S. sugar industry that stepped up their political activity in the wake of the fight over CAFTA. The cooperative spent a record sum — more than $1 million — on political contributions to House and Senate campaigns in the 2005-2006 election cycle, according to the PoliticalMoneyLine website. This is almost twice what the company spent during the 2002 cycle and $250,000 more than the total for 2004.

About 60 percent of the donations went to Democrats, which reflects a trend in the sugar industry that is unusual in agriculture. Whereas most agriculture political action committees (PACs) give more to Republicans, sugar PACs generally have a slight preference for donations to Democrats.

Some PACs representing the sugar industry, and particularly those representing the sugarcane industry in the south, lowered their contributions in the 2005-2006 cycle, but sugar PACs overall increased their political donations by a total of $250,000. Besides American Crystal, the Southern Minnesota Beet Sugar Cooperative nearly doubled its donations to Republican candidates, from $57,375 in the 2003-2004 cycle to $112,500 in the 2005-2006 cycle. Its spending on Democratic candidates also increased, from $108,500 in 2003-2004 to $156,250 in 2005-2006.

Price said the CAFTA fight played into American Crystal's decision to step up its political activity. "It's not solely a factor of CAFTA, but it's one thing we've experienced that makes people interested in being politically active," Price said.

He added that the group feels better about its position for the upcoming debate over the farm bill now that Peterson is chairman of the agriculture committee.

Sugar's growing clout was also reflected in the Bush administration's relatively timid proposals for sugar reform in the farm bill proposals it unveiled two weeks ago, according to some farm-group lobbyists. "We were pleasantly surprised by the administration's proposal," said Phillip Hayes, a spokesman for the American Sugar Alliance.

"These guys are not dumb. They can read the writing on the wall," Melancon said, referring to the 2006 elections. All in all, he said the proposal did not represent the radical reforms that some in the agriculture community had been expecting.

Susan Smith, a spokeswoman for the National Confectioners Association, said many lawmakers do want to change the sugar program, but they find that reform is always an uphill climb. She described the administration's proposals as interesting but not robust enough to amount to an overhaul.

Although U.S. sugar producers receive no subsidies, they are protected by high import tariffs. The government also restricts the amount of domestic sugar that can be placed on the market in order to keep the U.S. price high. The White House's only new proposal was to eliminate a 2002 farm bill rule that requires the administration to allow the release of U.S. sugar on the domestic market only when imports hit a certain trigger level. That rule, backed by sugar interests, tried to ensure that the government kept imports below that threshold. If the rule were triggered, U.S. farmers could flood the domestic market and drive sugar prices down — in principle leading to the forfeiture of crops and high bailout costs borne by taxpayers.

But that would violate another rule in the 2002 bill that requires the sugar program to impose no direct costs on taxpayers. One critic of the U.S. sugar program predicted that any change opposed by the sugar industry is "absolutely" dead in the water with Democrats in charge of Congress, especially with Peterson in charge of the House Agriculture Committee.

Reflecting this shift, Price said American Crystal's top priority in 2007 is to preserve the sugar program during the debate on the farm bill. The group has "concerns" about a free trade agreement (FTA) that the administration has negotiated with Colombia, but it takes a more positive view of the FTAs negotiated with Peru and Panama, Price said.

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