POLITICS: PennAve

Sweet deal for the sugar industry

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Politics,Congress,Agriculture,Entitlements,PennAve,Sean Lengell,Farm Bill,Law,Subsidies

While Congress is still shaping a new farm bill that will set federal agriculture policies for the next five years, at least one item is almost certain to remain intact in the final draft: the sugar program.

Farm subsidies typically are among the most bipartisan measures on Capitol Hill, as lawmakers from agricultural states and districts — despite party — come together to ensure their success. And the sugar program is no exception.

But a growing coalition of fiscal conservatives, free marketers and environmentalists, along with with the powerful food-manufacturing industry, say the federal policy aimed at helping sugarcane farmers is archaic and unfair, and vow to continue their fight.

"The sugar program is the most Soviet [style] centrally planned of all the agriculture programs," said Chris Edwards, director of tax policy studies at the Cato Institute, a libertarian-leaning Washington think tank. "It really is astounding."

To help protect U.S. sugar growers from foreign competition, the Department of Agriculture regulates the flow of imported sugar. Pro-sugar policy advocates say that without such a move, the U.S. market would be flooded with inexpensive foreign sugar, putting the estimated 142,000 U.S. sugar industry jobs at risk.

And with the governments of mega-sugar producers like Mexico and Brazil subsidizing their industries much more than the U.S., advocates say American farmers would be at a serious disadvantage without federal help.

"The global sugar market is the most distorted commodity market in the world," said Phillip Hayes of the American Sugar Alliance, a staunch supporter of U.S. sugar policy. "We can compete with Mexican sugar producers -- we're far more efficient than Mexican sugar producers. [But] we cannot compete with the Mexican government."

The USDA also provides loans to sugarcane and sugar beet producers and processors that guarantee a minimum price. Sugar producers and processors have the option of repaying the loan with sugar or selling their sugar on the market if the going price is higher than the loan amount.

By avoiding oversupplies and shortages, the sugar industry says its prices remain stable and avoid the need for directed subsidy payments to farmers.

"From a taxpayer standpoint, sugar really stands out as the cheapest of any commodity policy," Hayes said.

But opponents of the government's approach say it artificially inflates prices for consumers, and they blame the powerful sugar lobby for squeezing lawmakers of both parties to embrace the policies.

"I don't think there's another program in the federal budget that shows you the power of a narrow interest," Edwards said.

And since fruit and vegetable growers, as well as beef producers, generally don't enjoy federal subsidies, critics say the sugar policy is unfair.

"It's not like U.S. agriculture wouldn't survive without subsidies and protections -- it certainly would," Edwards said. "It would look different; it would be more efficient."

The American Sugar Alliance says it would welcome an end to U.S. sugar subsidies -- if the governments of other countries also agree to stop subsidizing their sugar industries.

"It is the position of the sugar industry that we should target all global sugar subsidies and let the best businesses -- not the most subsidized -- thrive," Hayes said. "However, we also recognize that the first step to a free market cannot be unilateral disarmament."

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