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America's Sugar Daddies
ugar growers in this country, long protected from global competition, have had a great run at the expense of just about everyone else refineries, candy manufacturers, other food companies, individual consumers and farmers in the developing world. But now the nation's sugar program, which guarantees a domestic price for raw sugar that can be as much as three times the world price, needs to be terminated. It has become far too costly to America's global economic and strategic interests.
The less defensible a federal policy is on its merits, the greater the likelihood that it generates (or originates from) a great deal of cash in Washington, in the form of campaign contributions. Sugar is a sweet case in point. The Fanjul brothers, Florida's Cuban-American reigning sugar barons who preside over Palm Beach's yacht-owning society, were alone responsible for generating nearly $1 million in soft-money donations during the 2000 election cycle. Alfonso Fanjul, the chief executive of the family-controlled Flo-Sun company, served as Bill Clinton's Florida co-chairman in 1992 and even merited a mention in the impeachment-scandal Starr report, when Monica Lewinsky testified that the president received a call from him during one of their trysts. Meanwhile, brother Pepe is equally energetic in backing Republicans, so all bases are covered.
The Fanjuls harvest 180,000 acres in South Florida that send polluted water into the Everglades. (A crucial part of their business over the years has been to lobby not just against liberalization of the sugar trade, but against plans to have the sugar industry pay its fair share of the ambitious $8 billion Everglades restoration project.) The Fanjuls had been Cuba's leading sugar family for decades before Fidel Castro's takeover. Crossing the Straits of Florida, they bought land in the vicinity of Lake Okeechobee, which feeds the Everglades, and imported platoons of poorly paid Caribbean migrant workers. Their business was aided by the embargo on Cuban sugar. The crop is protected from other competition by an intricate system of import quotas that dates back to 1981.
The government does not pay sugar producers income supports as it does many other kinds of farmers. Instead, it guarantees growers like the Fanjuls an inflated price by restricting supply. Only about 15 percent of American sugar is imported under the quota rules, and while the world price is about 7 cents a pound, American businesses that need sugar to make their products must pay close to 21 cents. Preserving this spread between domestic and world sugar prices costs consumers an estimated $2 billion a year, and nets the Fanjuls who have been called the first family of corporate welfare tens of millions annually. The sugar exporters who are able to sell to the United States also benefit from those astronomical prices. The Dominican Republic is the largest quota holder, and one of the big plantation owners there is surprise the Fanjul family.
The sugar situation hurts American businesses and consumers, but its worst impact is on the poor countries that try to compete in the global agricultural markets. Their farmers might never be able to compete with corn or wheat farmers in the United States, even if the playing field were leveled. But they can grow cotton and sugar at lower prices than we can, no matter how advanced our technology. Our poorer trading partners bitterly resent the way this country feels entitled to suspend market-driven rules whenever it appears they will place American producers at a disadvantage.
In fairness, the United States is not alone in distorting the sugar trade, and the European Union's massively subsidized exports of beet sugar make it the biggest culprit. The American sugar lobby uses that fact as a shield, arguing that the crop not be included in any regional trade deals until distortions are addressed by all countries at the World Trade Organization. But quotas are set between trading partners, not on a global level. Right now the United States is negotiating the creation of a hemispheric free trade area that would benefit many United States industries, including other agricultural sectors. It is ridiculous for the sugar lobby to argue as it does vociferously that sugar should not be included in the agreement even though it is one of the few products that some Latin American republics can hope to ship to the American market.
So far the Bush administration has rightly rejected the sugar lobby's push to keep the commodity off the table. The danger, however, is that American trade negotiators might still prove far too deferential to sugar industries when hammering out the trade deals' specifics. For instance, any move to phase in elimination of sugar quotas over a period longer than a decade (as was done in the North American Free Trade Agreement) would undermine any promise a trade deal might hold for poor farmers in Latin America. The strength of the protectionist sugar lobby in Washington which unites Southeastern cane growers and Midwestern beet farmers was apparent in the success of Senator Mary Landrieu of Louisiana last year in bashing Nafta's modest sugar provision during her re-election bid.
If the sugar trade were liberalized, world prices would start creeping up and domestic prices would fall, which would benefit both the developing world and the American economy. The industry itself cites "alarming" studies that if the United States imported an additional two million metric tons roughly the amount Central America exports domestic prices would be cut in half. But that is no argument for opposing trade liberalization. That is an argument for the handful of individuals who control the sugar business in this country to start thinking about a new line of work, and be grateful for the long run they had.