Free-trade pact isn't so sweet for sugar lobby

A bitter legislative fight is brewing over sugar as lawmakers and lobbyists prepare to debate a new free-trade pact with Central American countries. The deal, called the Central American Free Trade Agreement, or CAFTA, would allow only a bit more sugar into America’s long-protected market. The extra 100,000 tons it would let in is just 1 percent of the 10-million-ton domestic market. Eventually, that would rise to 150,000 tons.A bitter legislative fight is brewing over sugar as lawmakers and lobbyists prepare to debate a new free-trade pact with Central American countries.

The deal, called the Central American Free Trade Agreement, or CAFTA, would allow only a bit more sugar into America’s long-protected market. The extra 100,000 tons it would let in is just 1 percent of the 10-million-ton domestic market. Eventually, that would rise to 150,000 tons.

But if the pact — which could be debated as soon as this month — passes as written, the deal may be seen as the beginning of the end of Big Sugar’s long reign as part of the politically protected class. Observers say it is too close to call whether the deal will pass.

Sugar growers and refiners opposed to the deal fear that CAFTA could signal the end not just of their political power but also their $4-billion-a-year industry as a whole as they increasingly are forced through bilateral trade deals to compete against low-cost cane producers.

“CAFTA is just the tip of the iceberg,” said Phillip Hayes, the spokesman for the American Sugar Alliance.

Confectioners and other sugar users steamed at paying higher sugar prices usually find themselves on the losing end to organizations like the alliance, a powerful lobbying group that represents growers, refiners and processors. The 2002 farm bill, for example, included nearly all of the alliance’s priorities, according a Congressional Research Service report.

But a collection of groups is arrayed against the sugar farmers and processors who benefit from the current program. That includes a new, 16-member Sugar Reform Caucus headed by Rep. Mark Kirk (R-Ill.), whose Chicago-area district is home to Brach’s and Jelly Belly candy facilities.

Kirk points to estimates that the sugar program costs $1.8 billion each year in higher prices, which he says has forced candy makers to close shop.

The current U.S. sugar program essentially guarantees a minimum price through loans set at rates often higher than world market prices, and it restricts the amount of sugar that can be imported.

Critics say prices are artificially high. In December, the global sugar futures market was 8.8 cents per pound, compared to 20.5 cents here.

Sugar protections date back to at least the 1930s, with only brief periods of unfettered trade. But Kirk and others are optimistic that sugar’s power is dissolving, in part through free-trade deals such as CAFTA.
“With an increased Republican majority there is greater sympathy for letting the private sector make these decisions,” Kirk said.

The politically savvy sugar industry could be tough to topple, however.

“There have been anti-sugar caucuses for 20 years, and they’ve been ineffective,” Hayes said.

American Crystal Sugar; Flo-Sun Inc., a Florida-based sugar agribusiness; and the American Sugar Cane Growers Association are all in the top 10 agribusiness givers to federal candidates and parties, according to the Center for Responsive Politics.

Another factor: sugar sweetens local economies across a relatively large geographical swath. Cane is grown in Hawaii, Louisiana and Florida. Sugar beets are grown in 14 states, with the biggest crops grown in the Red River Valley in Minnesota and North Dakota.

In Washington, the American Sugar Alliance spent more than $800,000 lobbying in the first six months of last year.

But what many say sets the sugar industry apart is its singularity of purpose. Companies such as Mars and Coke and other food and beverage makers that bristle under higher sugar prices have a list of legislative priorities, of which sugar reform is just one. Sugar growers and refiners are focused on protecting the program.

U.S. trade officials, for example, received 70,000 letters during their negotiations over CAFTA from people urging that sugar be left out of the deal.

“They are almost zealots,” said Tip Tipton, a D.C. lobbyist and former head of the International Dairy Foods Association. The association’s members would benefit from lower sugar prices for ice cream and chocolate milk products.

The debate over CAFTA will be unlike the fight over farm bills, where Congress has usually resisted efforts to reduce price supports for sugar. Growers and producers will have to battle a number of free-trade coalitions in addition to food groups.

And sugar opponents say they are as organized as they have ever been. The groups include the new Food Trade Alliance, an organization of “consuming industries” patterned after a group that successfully lobbied the administration last year to end tariffs on steel imports. Its membership includes the National Retail Federation, the National Restaurant Association and the Food Marketing Institute.

Alliance members are meeting today to discuss the group’s strategy for this year.

There also is the Emergency Committee for American Trade, which includes manufacturers and other industries that stand to benefit from freer trade.

In addition to the presence of more participants in the fight, the terms of battle are different, too. Farm bills can be amended; trade bills can’t. Lawmakers can only approve or reject them outright.

The sugar industry’s most recent victory was won outside of Capitol Hill. Sugar was left out of a free-trade pact with Australia that Congress approved last year.

Both sides say CAFTA could reset the precedent for more sugar imports.

Opponents fear that larger trade deals will be easier to pass if CAFTA goes through. Of particular concern to many farming groups is the Free Trade Area of the Americas, which would include ag giant Brazil.

For that reason, several other ag groups in town are opposing CAFTA, such as the National Farmers Union, which represents 300,000 small to midsize farms.

“The problem we have in rural America is there’s this promise of ‘We’re just one trade agreement from prosperity,’ but we never seem to make it to the corner,” said Tom Buis, who runs the union’s lobbying shop.

Hayes, of the alliance, said his group wants free-trade deals to be negotiated on a multilateral basis to ensure that U.S. growers are competing on a level playing field.

Hayes and Buis said bilateral deals are unfair because often the countries involved pay lower wages and have lower environmental standards.

Hayes and his group contend that lower sugar prices will benefit only corporate profits and won’t be passed on to consumers.