Sugar policy makes my head buzz

Photo of sugar cane from hookbrother's flickr collectionNot the sugar buzz I was hoping for

Sometimes the twists and turns of farm and trade policy makes me dizzy. Today's example: sugar.

To explain this properly, I'd probably need the creators of the Meatrix to make a short animation, but I'll give it a try, with my information coming from a New York Times article digested by FarmPolicy.com.

Under the terms of the North American Free Trade Agreement (NAFTA), on January 1, 2008, Mexican sugar can be imported into the U.S. without tariffs or quotas. That makes for an unwelcome New Year for the domestic sugar industry and the corn industry. Ironically, both of these industries are protected by government programs. The domestic sugar industry is supported by complicated combination of loans, quotas, and import restrictions. Although the industry likes to point out that the program operates without any federal funding, we all pay for it through higher sugar prices. The sugar lobby is one of the most generous legal bribers campaign contributors in Washington among food growers, giving $2.7 million to House and Senate incumbent candidates in 2006, according to the Center for Responsive Politics. Corn production, of course, is supported by billions of dollars federal subsidies each year, allowing the producers of HFCS to buy their raw material at a price below the cost of production. (See CRS reports RL34103 and RL33541 for much more about sugar policy and proposals.)

But NAFTA also means that Big Corn will be able to export government-subsidized HFCS to Mexico, which might displace the use of sugar in Mexico (and wipe out Coca-Cola made from real sugar?), thus leading to more exports to the U.S. That's good for the corn industry, probably bad for the domestic sugar industry.

The Food and Farm Bill to the rescue?

Congress is ready to step into this mess with modifications to the already messy sugar support program through the Food and Farm Bill. And, wouldn't you know, the solution involves ethanol. To paraphrase Homer Simpson in Marge vs. the Monorail: "Ethanol. Is there anything it can't do?"

A provision in the Food and Farm Bill would require the federal government to buy surplus American sugar and sell it to ethanol manufacturers at a discount . (Who pays the difference? Us taxpayers, of course.) The ethanol plant operators aren't happy about the sugar plan because it will require expensive new equipment to add the sugar (refined sugar, not sugar cane) to their fermentation tanks. And the USDA is not very happy either, saying that they want flexibility to sell the surplus sugar for other uses like animal feed or industrial use. They are also concerned that the program has no upper limit -- the USDA could be on the hook for immense sugar purchases.

Ethanol, of course, owes much of its success to government subsidies and tax policy. It costs more to make the distillate than people will pay, so there is a federal tax credit. And also federal mandates for biofuels productions which are spurring the construction of new ethanol plants.

In other words: when confronted with free trade, set up more government programs as protection.

It certainly helps to have a powerful lobby in Congress, preferably one that tosses around big checks as legal bribes as campaign contributions. That way, Congress will step in with some special programs or tax breaks. Little guys, like the organic strawberry growers of California who are being undercut by Mexican organic strawberries, or small almond growers struggling to deal with the pasteurization rule put in place by the big growers, are out of luck until they can pony up some dough in Congress.

The sugar industry also has the advantage that it can be made into ethanol. Imagine if the Topps meat company had been able to make ethanol out of that potentially E.coli contaminated meat -- they'd probably still be in business, earning great returns for the private equity firm that bought them.

All of this makes me wonder when this Rube Goldbergian system of subsidies that support loan programs and incentives which are backed by quotas is going to become so unstable that it will break apart like a jalopy going down a bumpy road.

 

Photo of moonrise over sugar cane from hookbrother's flickr collection, subject to a Creative Commons License.

2 Responsesto “Sugar policy makes my head buzz”

  1. There are some serious mistaken assumptions in this piece, especially surprising for a website to publish that purportedly is about a more sustainable, just and fair food and farm policy site!

    There was just a recent superstar conference on NAFTA dealing with agriculture, immigration and detailing the overall devastating impacts of this agreement on both the US and Mexico.

    http://iatp.typepad.com/thinkforward/2007/10/lessons-from-na.html

    Next year is a pivotal year because all tariffs will be lifted on sensitive agricultural products. Already, over 2 million Mexicans have been driven off their land due to our dumping of our cheap corn. NAFTA + threatens to obliterate more of them. and yes, it is a threat to our sugar industry, which is still more "efficient" than mexico, so they might get dumped on too by our cheaper sugar.

    The sugar program in many ways SHOULD be the model program for our agricultural policies. it is a supply management program, so we only produce what we need, and we limit imports. This is a socially just policy because

    1. We do NOT DUMP sugar on the world markets. We dump almost all our other commodities (esp. corn) to devastating effects in many countries, undercutting their farmers and undermining their local food sovereignty

    2. WE guarantee a fair price to exporters. the Sugar processing industry (Hershey, Phillip Morris, Unilever and the like) may point out that US sugar prices are double the world price, but the world price is only so low because of Brazil and their sugar plantations which rely on slave labor and monocropping at the expense of diversified family farmers. Conditions are so bad on these plantations that life expectancy for sugar workers in Brazil is now lower than it was at the time of slavery!!! So anyone who says we need to import more cheap Brazillian sugar is endorsing that type of agriculture that i think most of us do not approve of.

    Further, because we guarantee a higher world price for the 41 countries we allow limited imports from, they are paid a much fairer wage. thus, developing countries LIKE the US sugar program because they realize market access without a decent/fair price means nothing. Mauritius testified at a US Senate hearing in favor of keeping the US sugar program the way it is.

    3. No cost of US taxpayers. Everyone keeps bitching about subsidies for commodities and US taxpayer money for them. Well, the sugar program, by making corporate agribusiness and food processors pay a fair price, means THEY pay for the cost of sugar, not US taxpayers. This is why these groups (and don't tell me Philip Morris and the US Sweeteners Group ain't a powerful special interest too) want instead to shift to a taxpayer subsidy program to make US taxpayers pay for the cost of sugar if the price drops too low, which is the model we have now ("countercyclical payments") for our commodities like corn, wheat, that everyone bitches about.

    as to higher prices for consumers--well, we'll either pay subsidies or we can pay what we pay now for sugar, which does not rely on subsidies and mostly harms agribusiness profits since they want cheap sugar. and if you advocate healthy eating, why in god's name would you want sugar to be CHEAPER???! When i go to the grocery store. sugar is already pretty damn cheap. and i paid $.99 cents for my Skittles the other day, which is what i should pay given how bad it is for my health. I don't need cheaper Skittles or cupcakes!!

    Plus, i do not mind paying a fair price for sugar if i know that it is going to supporting sugar growers, as well as unionized jobs at sugar plants (almost all US sugar plants are unionized). these provide good paying jobs in some of the most depressed parts of the country--North Dakota, Montana, Red River Valley (Minnesota).

    So the sugar model is threatened by NAFTA, with neither mexico or US sugar growers to benefit, and all the benefits will accrue to the likes of Mars and Hershey and their profits. and our dumping of corn into Mexico will also increase if the tariffs are lifted. i'd much rather drink sugar soda than HFCS if given the choice.

    Here is also a good report put out by IATP on sugar and CAFTA:

    http://www.iatp.org/iatp/library/admin/uploadedfiles/DR-CAFTA_Threatens_US_Sugar_Program_New_Report.pdf

    Bottom line: free trade ideology is a disaster for local food and family farmers. the sugar program (and supply management in general) directly challenges the ideology of free trade, which is all about sourcing for the cheapest commodity from around the world and pitting farmers against each other in a horrible race to the bottom, with nobody winning except Cargill/Mars/Conagra/Tyson. Hopefully, Ethicurean can highlight some more voices on these issues...

  2. Thanks for the very thoughtful and detailed comment, Farm Bill Girl. I'll respond to some of your points below, in each case led by a quotation from your comment.

    "Hopefully, Ethicurean can highlight some more voices on these issues…"

    That's why we have a comment box. We also consider guest contributions.

    "WE guarantee a fair price to exporters...i do not mind paying a fair price for sugar if i know that it is going to supporting sugar growers, as well as unionized jobs at sugar plants..."

    Good points. I hadn't thought of the national sugar program as a fair trade analogue. Perhaps the fair trade model is what we need to consider in future farm policy.

    "No cost of US taxpayers."

    The above phrase, and the phrases "at no cost to taxpayers" and "doesn’t cost taxpayers a dime" that are used by the Sugar Alliance are slightly inaccurate. Taxpayers do pay for the program, but not through our taxes. It would be more accurate to say that none of your tax dollars go to fund the sugar program.

    "as to higher prices for consumers–well, we’ll either pay subsidies or we can pay what we pay now for sugar, which does not rely on subsidies and mostly harms agribusiness profits since they want cheap sugar. and if you advocate healthy eating, why in god’s name would you want sugar to be CHEAPER???!"

    You're absolutely right. It makes a lot more sense for crop support program to be paid for when the good is purchased instead of through taxes, so that consumers pay for it directly. In addition, that means that the people who use the program pay for it, instead of it being paid for by everyone. Ethanol is a great example of the latter case: everyone's taxes pay for the subsidies for corn (and also military protection of the oil that makes mechanized and long-distance agriculture possible), which depresses the prices at the ethanol refinery. The ethanol made from that corn receives various tax credits, further hiding the cost of the fuel from the purchaser.

    Using ethanol refining as a sink for excess sugar, therefore, moves away from the idea of consumers seeing the cost of the support program whenever sugar is purchased.

    "but the world price is only so low because of Brazil and their sugar plantations which rely on slave labor and monocropping at the expense of diversified family farmers."

    I agree that we need to consider where the cheap sugar will come from. The situation on Brazilian sugar plantations is another example of why all future trade agreements must also include labor and environmental standards. NAFTA does not. CAFTA does not. But since the President's "Fast Track" authority expired, Congress has reinserted itself in the negotiating process. I worry that the corporatist arm of the Democratic party is stronger than the progressive arm and would water down any labor or environmental standards.

    "Already, over 2 million Mexicans have been driven off their land due to our dumping of our cheap corn."

    It's probably the case that many of them have come to the United States in search of work, perhaps to the big slaughter houses in Iowa and Nebraska, where some of that corn was grown. A funny thing about the free trade ideology so popular in Washington is that it does not apply to labor. Capital and goods are allowed to move freely between Mexico and the U.S., but humans must not. I haven't thought much about whether allowing free migration would help ameliorate some of the effects of NAFTA on the poor in Mexico. My initial thought is that free migration would be readily exploited by corporations seeking cheap labor -- i.e., another race to the bottom.

    On the subject of Mexican corn: has anyone tried to import any of the heirloom varieties of corn from Mexico? Perhaps there are people who would like to buy varieties that have been grown for centuries.