Sugar Daddy No More

Following two years of simmering controversy, the U.S. Senate last month voted to approve an international treaty opening up trade relations between the United States and the Dominican Republic, Costa Rica, Guatemala, Nicaragua, Honduras, and El Salvador. As expected, the 54-45 vote fell more or less along party lines, with Sen. Mark Dayton voting against the measure and Sen. Norm Coleman for it. It might well have been a non-headline except for one thing: In the months leading up to the June 30 vote, in a rare breaking of ranks with the Republican Party, Coleman had loudly and adamantly denounced the pact.

Minnesota is the largest producer of beet sugar in the nation, and the Dominican Republic-Central American Free Trade Agreement, better known as CAFTA, threatens to push Minnesota sugar beet farmers--already smarting from the North American Free Trade Agreement of the mid-1990s--into extinction. Since 2001, Coleman has received some $26,000 from sugar interests and, up until the eve of the Senate vote, was adamant that he would not vote for the measure unless changes were made to protect Minnesota farmers.

In the wake of the vote, Coleman claims to have secured those protections. But with the treaty now scheduled for debate in the U.S. House of Representatives, beet farmers and critics of the trade bill in general are suggesting that the guarantee Coleman is touting is nothing more than a costly short-term Band-Aid. What he has really done, they say, is to ensure the continuation of his lightning ascendancy within the GOP.

"I'm extremely disappointed," Brent Davison, who grows 1,800 acres of sugar beets in Tintah, Minnesota, told the Associated Press. "We thought Senator Coleman should have been a champion for the sugar industry, coming from a state with the largest sugar beet production."

And David Roche, president of a farmers' cooperative, also expressed dismay to the AP. "I was offended that he feels that he knows what is best for the industry better than we do," said Roche, who lives in Fergus Falls, Minnesota. "I live and breathe the sugar industry 24 hours a day. CAFTA is not what's best."

In hard numbers, Minnesota's sugar industry generates $2 billion a year, creating $60 million in tax revenue. Although technically a subsidized agricultural commodity, unlike other crops sugar has historically earned its keep. The U.S. sugar program currently operates at no cost to taxpayers thanks to a system of loans, domestic quotas, and import restrictions.

The trade pact would keep the subsidy system for U.S. sugar producers but open up U.S. markets to cheaper Dominican and Central American sugar. This in turn would flood the domestic sugar market and drive down prices even further. To combat this, the U.S. government can buy Central American and Dominican sugar to keep it off the open market. The Institute for Agriculture and Trade Policy (IATP), a Minnesota-based agriculture and trade watchdog group, says cost estimates for this program run as high as $28 million for the first year alone.

Coleman's compromise would simply slow the rate at which the amount of foreign sugar enters the U.S. over the next 18 months, until the 2002 farm bill expires in 2007. Eventually, import ceilings will go up and domestic producers will likely be unable to compete with the low prices and decreased demand. The U.S. sugar industry--including more than 32,000 jobs in the Red River Valley--would inevitably totter.

Worse, say analysts on both sides of the issue, even though the accord's impact will be relatively small, at least initially, CAFTA could set a precedent that will dramatically affect future free trade initiatives. Since the 1993 passage of NAFTA, hundreds of thousands of tons of Mexican sugar have flooded the U.S. market. The Central American agreement is based in part on NAFTA's terms. The new pact will help set the terms of trade agreements in the works with Thailand, South Africa, and a number of South American nations, all of which are expected to open the sugar floodgates still further.

 

The director of the Trade and Agriculture Project at IATP, R. Dennis Olson, has tracked the sugar issue closely. Among other concerns, he argues that U.S. free trade agreements have benefited big agribusiness and other multinational corporations at the expense of small farmers worldwide. Having the federal government slow the inevitable by buying foreign sugar would simply replace a system that has helped local farmers at no cost to taxpayers with a costly one that would benefit agribusiness.

"Coleman decided that expanding the failed trade deregulation model set by NAFTA, which primarily benefits global food corporations and pharmaceutical cartels, takes precedence over standing up for Minnesota's family farmers and rural communities," he complains. "Thanks to trade deregulation through NAFTA and other trade agreements, the United States is actually projected to become a net importer of agricultural products for the first time in the last 45 years. It's no coincidence that this worrisome trend in agriculture has coincided with a soaring U.S. trade deficit that threatens to undermine our economic security."