BODY: For anyone who thinks of the United States as
a free-trade nation, the 10-story brick sugar refinery on Highway 90A here on
the outskirts of Houston is startling.
The plant can
produce up to 500,000 tons of sugar a year, enough to sweeten about 90 billion
doughnuts. But while America has a sweet tooth, it does not need all that sugar.
Indeed, America is swimming in sugar, largely because the sugar business is one
of the economy's most protectionist niches.
Sugar
programs that protect growers from foreign competition cost American consumers
almost $2 billion a year in higher prices for everything from candy bars to cold
cereal, according to government studies. Artificially high prices have led to
overproduction, leaving taxpayers the owners of one million tons of sugar that
they pay $1.4 million a month just to store, some of it in Sugar Land.
Yet earlier this year the owner of the plant here -- the
Imperial Sugar Company, the nation's biggest sugar refiner -- was forced to file
for Chapter 11 bankruptcy protection, because it has lost so much money lately
turning relatively high-priced raw sugar into the refined sugar it sells into a
depressed, glutted market.
Now, refiners are demanding
an overhaul of the sugar program. Consumer groups want it abolished. And even
its backers and beneficiaries -- big growers that are major donors to both
political parties -- are dissatisfied. They want more protection, complaining
that new trade initiatives, like the North American Free Trade Agreement,
threaten to undermine the industry and further depress the price of sugar.
Congress is now hearing testimony on these matters as it
takes up a new farm bill. The conventional wisdom is that
Washington is unlikely to scrap a program that has bipartisan support, any more
than it has been prone to eliminate supports for other farmers.
But some lawmakers say sugar policy, in particular, is ripe for
revision.
"Events of the past year indicate that the
sugar program is becoming increasingly unmanageable and that radical reforms are
needed urgently," said Richard G. Lugar, chairman of the Senate Agriculture
Committee and a longtime opponent of the program.
At
the heart of the debate is a sugar policy that since the New Deal has held that
domestic growers ought to be shielded from the vagaries of the commodity
markets. The current program, put in place in 1981, promised that kind of
stability by limiting imports and making loans to growers.
But in recent years, helped by technology and weather, production has
exploded. And government policies and price supports, on balance, encouraged
farmers to abandon even more seriously depressed crops in favor of sugar beets
and cane.
Overproduction sent prices tumbling, hurting
growers. But the hardest hit were cane refiners. At times, the prices they paid
for raw sugar were higher than those at which they could sell refined sugar.
If nothing changes, industry officials fear a ferocious
one-two punch: the possible loss of cane-refining capacity at home, which could
hurt food producers, and a steady rise in imports, which could wipe out both
domestic growers and refiners.
Free-market economists
say that might be the most efficient outcome, but no industry disappears without
a fight. The refiners are just one of the interest groups that have stormed
Capitol Hill.
None are so powerful as the nation's
largest producer of raw sugar, the Flo-Sun Corporation of Palm Beach, Fla., run
by Jose Pepe Fanjul and Alfonso Fanjul, Cuban exiles who created a sugar empire
in the Florida Everglades and who are now big donors to both Republicans and
Democrats.
Flo-Sun and other giant producers want to
strengthen the program by putting new restrictions on domestic production of
sugar beets and cane. They also want to limit the scope of any future trade deal
that might lead to what they consider unfair competition.
"We don't believe we ought to sacrifice the American farmer to bring in
sugar that is subsidized by other governments," said Judy Sanchez, a spokeswoman
at U.S. Sugar, one of Florida's biggest cane producers.
Critics of the program -- from food producers to refiners to consumer
groups -- would like the program discarded or significantly weakened.
"We want the program phased out," said Jeff Nedelman, a
spokesman for the Coalition for Sugar Reform, a trade group that represents food
and consumer groups, taxpayer watchdogs and environmental organizations. "This
is corporate welfare for the very rich. The program results in higher prices for
consumers, direct payments by U.S. taxpayers to sugar growers, and it's the
Achilles' heel of U.S. trade policy."
Chicago, home of
Sara Lee cakes and Brach's Starlight Mints candies, has aligned itself with the
critics. A few weeks ago, Mayor Richard M. Daley and other city leaders
announced that they would lobby Congress to end the sugar program, which they
said was hurting the city's makers of candy and food by inflating costs.
Indeed, the General Accounting Office says the sugar
program cost consumers about $1.9 billion in 1998, with the chief beneficiaries
being beet and cane growers.
Senator Byron L. Dorgan, a
North Dakota Democrat who is a strong backer of the sugar program, says
Americans are not being overcharged. Rather, he contends, prices on the world
market are artificially depressed by surplus sugar from countries that subsidize
production.
"The world price has nothing to do with the
cost of sugar," he said. "And my contention is that the program causes stable
prices."
Americans' appetite for sugar is measured in
pounds. The average person in this sugar-saturated country consumes more than 70
pounds a year of refined sugar and that does not include most soft drinks,
sauces and syrups, which are sweetened with high-fructose corn syrup.
But even that appetite is no match for current levels of
sugar production. A record 8.5 million tons of sugar was produced in the United
States in 1999, and that sent raw sugar prices tumbling to 18 cents a pound, the
lowest level in 20 years. The Agriculture Department stepped in last June to buy
132,000 tons, at a cost of $54 million, or 20 cents a pound.
Imperial Sugar -- already burdened by $500 million in debt because of
an acquisition spree -- was hit harder than anyone in the industry. The company
was forced to buy raw sugar cane at about the same price that it could sell the
finished product.
"We're out of gas before we turn the
lights on," said I. H. Kempner III, Imperial Sugar's chairman, whose family
acquired its first holdings in 1907. Imperial filed for bankruptcy protection in
January.
The New York-based Domino, a unit of Tate
& Lyle of Britain and a leading supplier of pure cane sugar to grocery
chains, is also "in desperate shape," said Margaret Blamberg, a spokeswoman.
C&H Sugar, a big California refiner, is struggling both with low sugar
prices and the state's rising energy costs.
For
growers, the biggest threat is the political tide favoring free trade. Under
Nafta, Mexico is getting greater access to the American sugar market. And in
2008, the agreement will give Mexico unlimited access to the American market.
Just how much Mexican sugar can enter the American market
this year is in dispute. American trade officials say that about 100,000 tons of
surplus sugar is allowed in, while Mexican officials say the figure is 500,000
tons. Under an agreement reached at the Uruguay Round of global trade talks in
1994, the United States is required to import about 1.1 million tons of sugar a
year.
The solution, the growers say, is more protection
for the industry. Two weeks ago, the House Agriculture Committee heard testimony
from the major sugar producers, who proposed stricter marketing and production
controls at home and more restrictive trade policies.
"You have to fix the big trade problems," said Luther Markwart,
chairman of the American Sugar Alliance, which represents the major growers.
Trade experts, however, say the sugar program makes
free-trade talk seem hollow.
"Sugar is a nightmare in
terms of trade negotiations," said Prof. Robin A. King, an expert on trade
policy at Georgetown University. "This is one reason other countries get
frustrated with our position on free trade. They say, 'We want to trade, but the
items we produce you won't let in.' "
http://www.nytimes.com
GRAPHIC: Photo:
It costs taxpayers $1.4 million a month to store government-owned sugar. A
55,000-ton mound of raw sugar dwarfed a worker in Santa Rosa, Tex. (Brad Doherty
for The New York Times)(pg. 40)
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