Sugar import flood looms
Untitled
Free trade deal with Mexico may prompt U.S. program change
WASHINGTON (AP)--A looming free trade provision allowing Mexico to export unlimited amounts of sugar to the U.S. could force changes to the U.S. sugar program, which guarantees minimum prices to cane and beet farmers.
That program, which also props up sugar prices by limiting sugar imports, expires at the end of 2007 along with the rest of the current farm bill. The following year, the U.S. and Mexico are to form a common sugar market under the North American Free Trade Agreement.
A flood of Mexican sugar imports could cause domestic prices to plunge. That in turn would likely lead to taxpayer-funded government purchases of surplus sugar, unless changes are made to the sugar program.
The Congressional Budget Office projects that the program, which currently operates at no cost to taxpayers, would cost nearly $300 million a year by 2012.
Jack Roney, an economist with the American Sugar Alliance, an umbrella group of farmers, processors and suppliers, said he agreed with that projection, predicting that the Mexican imports would lead to government purchases of surplus domestic sugar.
Roney's solution is not an overhaul of the sugar program, but rather changes to the trade deal. He's calling for a "managed market" where Mexico agrees to limits in sugar exports, in exchange for limits of U.S. corn sweetener exports to Mexico.
"What would happen without that would be utter chaos," Roney said. "We could see sugar prices in both countries collapsing, and world dump prices flooding the U.S."
But Marci Hilt, a spokeswoman for the Office of the U.S. Trade Representative, said such an adjustment isn't on the table.
"USTR is not considering altering the NAFTA duty-elimination schedules for any products, including sugar," she said.
March 13, the World Trade Organization ruled that Mexico violated global trade rules by imposing a 20 percent tax on drinks that are sweetened with anything other than cane sugar grown in Mexico--effectively shutting out high-fructose corn syrup from the U.S.
Mexico might be willing to limit its sugar exports if it gets the United States to voluntarily limit corn syrup, said Gary Hufbauer, a senior fellow at the Institute for International Economics. Hufbauer said that Mexico could also make a deal for caps in other U.S. exports, such as poultry or beans.
"There are groups in Mexico who want limits," said Hufbauer, a strong critic of the sugar program. "I can see a bargain along those lines."
Officials at the Mexican embassy did not return phone messages.
Randy Green, president of the Sweetener Users Association, which represents companies that use sugar, predicted Congress will make changes to the sugar program.
"The program doesn't work well for the entire industry, because it's not balanced," Green said. "It need to be made more market-oriented."
Green said he didn't think it was realistic to expect new limits to be negotiated in 2008.
"There might be some vested interest in Mexico that would perceive a benefit from limiting American corn farmers' ability to sell down there," he said, "but I doubt that either the administration or members of Congress from corn-growing states think much of that idea."
Steve Williams, president of the American Sugarbeet Growers Association, said he wasn't surprised by the sweeteners' group calls for change.
"The users have always tried to change the sugar program," said Williams, who farms 700 acres of sugar beets in Fisher, Minn. "To me it's working very well." Minnesota is the largest producer of sugar beets in the nation.
Williams noted that in recent years, Mexican sugar prices have been running higher than U.S. prices.
"It's very difficult to say how things will play out in 2008 when it becomes a common market with Mexico," Williams said.
The American Sugar Alliance is already ginning up for a fight on the farm bill. Alliance spokesman Phillip Hayes called it "the most important piece of legislation that faces America's sugar farmers."
"We are willing to spend whatever it takes to maintain a strong sugar policy," he said.
The alliance plans to run advertisements in a Capitol Hill publication March 14, and has already distributed information packets to every Capitol Hill office on sugar policy.
It has hired Combest, Sell & Associates to lobby Congress. The firm includes former House Agriculture Committee Chairman Larry Combest, R-TX.
Meanwhile, some Minnesota lawmakers are already talking about finding an alternative market for sugar: ethanol. The state's Republican senator, Norm Coleman, said in a statement that he will push for a sugar-to-ethanol program.
But Coleman recently told reporters that he doesn't think the Bush administration is fully committed to such a program. He said that may be because of lingering resentment at the sugar industry's full-throttled opposition to the Central American Free Trade Agreement.
"I may get in trouble for this, but I think we still pay a little price for the resistance to CAFTA," said Coleman.
By "we," Coleman means the sugar industry. He voted to approve CAFTA.
"I just worry that at certain levels of the ag department, there is a little resistance from the rough-and-tumble fight over CAFTA," Coleman added.
But Minnesota Rep. Collin Peterson, the ranking Democrat on the House Agriculture Committee, ridiculed the sugar-to-ethanol idea, saying it wasn't economically viable. Peterson said he's tried to shoot down the idea at early farm bill hearings across the country.
"We will survive," Peterson said. "We can compete. This ethanol business is just a bunch of baloney."
Date: 3/23/06
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