Can the U.S. Kick Its Sugar Habit?

By Marcela Sanchez
Special to
Thursday, May 19, 2005; 5:12 PM

WASHINGTON -- "The world is watching,'' warned Deputy Secretary of State Robert B. Zoellick this week when he urged the U.S. Congress to ratify a free trade agreement with Central American and Carribean countries.

The agreement with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua, though tiny by U.S. economic measures, has big ramifications. It is a steppingstone in President Bush's global trade agenda and a key component of his promise to help boost prosperity and democracy in this hemisphere. But if Congress fails to ratify the agreement and "we retreat to isolationism,'' Zoellick warned, "Daniel Ortega, Hugo Chavez, and others like them -- autocrats of left or right -- will push ahead.''

As the Bush administration sees it, the agreement, now called DR-CAFTA, is the "logical culmination'' of 20 years of the region's efforts to make democracy stick. Without it, the long, uphill struggle for transparency, rule of law, good governance and market reforms by nations once embroiled in civil war and unrest would be for naught. If no economic benefit is to be found at the end of that journey, you can be sure those leaders who oppose everything to come out of Washington will gladly point out its failings.

That's pretty heavy stuff for a modest agreement and, yes, it certainly will have observers in the region debating the depth of Washington's commitment. But on a more basic level, the region is watching to see if the United States can do what it demands of everyone else: open markets and practice fairer trade.

Right now, Congress is on the fence because some powerful forces in this country think that opening 1 percent of a commodity market is too much. Under the terms of the agreement, sugar exports from DR-CAFTA countries to the United States would increase to barely 1 percent of U.S. production. The agreement even includes safeguards that allow Washington to pay foreign suppliers not to export their product if the U.S. sugar industry is "threatened.''

Even with the paltry concession and additional safeguard, the U.S. sugar industry is leading the opposition to DR-CAFTA, fearful that the agreement would represent the beginning of the end of a very sweet deal they've enjoyed for decades. The United States has long protected its sugar industry from low global prices with a combination of loans and quotas, making U.S. sugar prices as much as three times higher than the world average. Talk about an artificial sweetener.

According to a 2000 General Accounting Office report, those higher prices cost U.S. consumers between $800 million and $1.9 billion a year. That money ends up, by GAO estimates, in the pockets of sugar companies such as the one owned by Cuban exiles Alfonso and Jose Fanjul. Thanks to the generous federal program, the Fanjuls receive a $60 million annual bonus, enough to keep them (and their yachts) comfortably afloat.

In turn, the sugar industry has rewarded politicians handsomely. In 2004, the industry gave more to congressional candidates from both parties -- $2.4 million -- than any of the 46 agricultural sectors tracked by the Washington-based Political Money Line .

Meanwhile, sugar growers in the developing world continue to struggle unprotected in a distorted marketplace. For them, free trade agreements -- even one as limited as DR-CAFTA -- are as close as it gets to a real opportunity to prove their competitiveness with U.S. producers. To their credit, most of those producers from can say that they are competitive without the help of any government subsidies.

For some Latin Americans, the power of the U.S. sugar industry confirms their doubts about Washington's commitment to free trade. Latin American leaders -- more and more of them with left-of-center credentials -- are struggling to convince their base supporters they are not betraying them by keeping loyal to market reforms and negotiating free trade agreements such as DR-CAFTA.

There may be those who would conclude that all of these are reasons to oppose this deal altogether. But that's really missing the point. Free trade agreements are never going to be perfect deals, but will be only as good as both the public and the private sectors strive to make them. The Central American sugar industry already calculates that the additional DR-CAFTA sugar will represent over $40 million in earnings.

So, the world watches whether the United States will reward democratic reforms, stay engaged and become a better free-trader. But it is also watching both the Bush administration and Congress to see if they can dismantle price supports and claim their independence from oligarchs who ply the Caribbean with yachts paid for by hard-working consumers.

Marcela Sanchez's e-mail address is

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