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How sweet it isn’t. It’s never easy to absorb political losses, but for the U.S. sugar industry, the passage of the Central American Free Trade Agreement last year could signal the beginning of the end of its reign as the untouchable commodity. For years, Big Sugar steamrolled opposition by currying favor with lawmakers, playing the role of sugar daddy by doling out cash to fill the coffers of politicos. But the era of business as usual ended in 2005 as the sugar industry publicly faced heat from other agribusiness entities as well as lawmakers because of its opposition to CAFTA. And although lobbyists are skeptical that Congress will completely rework the controversial price-support system sugar relies on, the full consequences of being at odds with lawmakers and the Bush administration on CAFTA appear ominous. The current status of Big Sugar’s relationships with key lawmakers will be important, since upcoming legislative initiatives will test the strength of the sugar lobby as the United States continues to pursue more international trade agreements and Congress debates the specifics of the 2007 farm bill. Repairing the rift caused by the costly (both politically and financially) CAFTA battle will be the top priority for the sugar industry in 2006. “Folks understand why we did what we had to do,” says Jack Roney, director of economics and policy analysis at the American Sugar Alliance. “We chose the battle reluctantly and fought it with all our might. If there was anything to gain from that . . . [sugar] increased the administration and Congress’ understanding of the U.S. industry’s vulnerability with these trade bills.”
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The sugar industry’s plans of attack to repair its rifts on Capitol Hill and within the ag industry at large have yet to be revealed. Strategists won’t discuss their plans for massaging ruffled feathers in 2006. The famously tight-lipped industry meets at least weekly at the Virginia headquarters of the industry’s umbrella group, the American Sugar Alliance, to devise strategy. Washington reps such as Parks Shackelford of Florida Crystals Corp., Luther Markwart of the American Sugarbeet Growers Association, Donald Wallace and Jack Pettus of Don Wallace Associates for the American Sugar Cane League of the U.S.A., and Dalton Yancey of the Florida Sugar Cane League Inc. gather for marathon meetings to plot legislative action. The controversial 71-year-old price-support system uses loans with the government to set rates for U.S. sugar prices that often are higher than in the world market. According to a 2000 Government Accountability Office report, the sugar program costs U.S. consumers up to $1.9 billion a year in higher prices. Similar agriculture price-support programs have been abolished with government-sponsored buyouts. Sugar is in a lonely position because longtime allies like the tobacco and peanut industries no longer have the political heft to help it. “Sugar plays a weak hand of cards really, really well,” says one ag and trade lobbyist who asked not to be named. “They have their fights in private, and when they come out, [sugar] beet and cane, even though they are from different parts of the country, are unified.” A BAD BET That unity almost brought CAFTA to a halt. Besides working over lawmakers in Washington, sugar put together an aggressive grass-roots campaign, lobbying state legislators and governors while sponsoring petitions in producing and refining states to be sent to lawmakers. Sugar bet big in 2005 that it could strong-arm the Bush administration and Congress into excluding sugar provisions from CAFTA. The tactic had worked before. In 2004 the industry successfully negotiated itself out of the U.S.-Australian Free Trade Agreement. This time around, despite the entire heft of the sugar beet and cane industry, which thrives in 19 states and comprises a nearly $4 billion-a-year industry, Big Sugar lost — big time. CAFTA squeaked by 217-215 in the House on July 28. The agreement passed with a sugar provision intact that allows countries in the agreement to import 100,000 tons, or 1 percent of the 10-million-ton domestic market. Sugar imports will eventually increase to 150,000 tons. “[CAFTA] was their Waterloo, in essence,” says Clayton Yeutter, a former secretary of agriculture and top trade negotiator at the Office of the United States Trade Representative for the U.S.-Canada Free Trade Agreement and now a lobbyist at Hogan & Hartson in D.C. “They certainly burned a lot of bridges with the administration. It will be a long while before they recover any kind of productive working relationship . . . [sugar] may never do it with this administration.” Sugar was virtually alone in its quest to stop CAFTA among ag groups. It was at odds with pro-market-access farm groups such as the National Pork Producers Council and the International Dairy Association, which led an ag coalition supporting CAFTA. Not only did it lose clout on Capitol Hill and within the ag community; rather, lobbyists say that because the industry took such a hard line against the trade bill, it drew attention to itself from other sectors like tech and manufacturing. “They’ve attracted interest from people outside the ag community that feel very strong about market access,” says Randy Russell, a name partner at lobby shop Lesher & Russell. FREE RANGE Ag groups at odds with sugar over trade have turned to organizations such as the National Association of Manufacturers and the U.S. Chamber of Commerce in an effort to combat the sugar industry. “It can’t just be an intra-agriculture fight,” says Christopher Wenk, a trade specialist at NAM. “Folks in the agriculture community have reached out to organizations like ours to kind of have an alliance.” Political fence-mending aside, the industry will face a series of legislative threats in 2006 that could spell trouble for the future of the sugar lobby. In all, the industry is going to have to deal with 21 separate free trade agreements currently under consideration as part of the post-CAFTA landscape. Since its inclusion as an industry in CAFTA, sugar is no longer exempt from these agreements. “When you look at the 21 countries after CAFTA that we’re still negotiating with to export about 25 million tons of sugar, we are quite worried that the administration might continue to make concessions to these countries that would force us to reduce our production even further,” says the American Sugar Alliance’s Roney. Besides individual trade agreements, sugar, along with the entire farm community, will likely face revisions in subsidy programs based on the outcome of the ongoing Doha Round. The negotiations have already targeted the European Union’s sugar subsidies, which had also come under fire from the World Trade Organization. The EU agreed to reduce sugar subsidies, which paid sugar farmers three times the world price. The outcome of these negotiations will help determine where the U.S. sugar industry stands in the upcoming 2007 farm bill. And unlike with the 2002 farm bill, when Congress was flush with cash, this time around lawmakers will be looking to make cuts wherever possible. Says lobbyist Russell: “There are a lot of people in the business community, not agriculture related, that are very concerned about a Doha Round that could potentially get hijacked by the U.S. sugar industry.”

Anna Palmer can be contacted at [email protected].

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