- Import limits inflate domestic prices even with global surplus
- Clout of farmers compounding headache for trade negotiators
A sweet deal for American sugar farmers is compounding delays in a proposed trade agreement affecting 40 percent of the world’s economy.
The commodity has become a sticky subject in talks over the Trans-Pacific Partnership, potentially the biggest trade deal in history and a key goal of the Obama administration. TPP, as it’s known, would link a dozen countries and, its proponents say, make it easier for U.S. companies to sell goods around the world.
But the trade deal may also weaken protections for the sugar industry dating back to the Great Depression should negotiators heed the calls of Australia and other nations for the U.S. to loosen a quota system that protects domestic suppliers while making the product more expensive for consumers. As they have for decades, sugar lobbyists are fighting to keep it that way by using their clout with lawmakers.
In Washington, that means one thing: money. Sugar accounts for a small fraction of U.S. farm output, but the industry contributes more to congressional campaign coffers than any other commodity producer. Between 2007 and 2014, growers donated $18.5 million, according to the Center for Responsive Politics.
“The sugar lobby is one of the strongest in the country,” said James Cassidy, global head of sugar derivatives at Societe Generale in New York.
Sugar isn’t the only thing snarling the trade talks, which broke off in July and are expected to resume as early as September. Other issues include dairy products, cars and intellectual property rights.
But sugar occupies a special place in U.S. politics. The commodity has been a source of controversy since before the American Revolution. Import protections have artificially inflated domestic costs for decades.
Nowhere is the industry’s clout felt more than in Florida, base of the nation’s most powerful sugar barons, the Fanjul brothers. Between them, the Fanjuls -- Alfonso, Jose, Alexander and Andres -- have long-standing ties to at least three U.S. presidential candidates: Senator Marco Rubio, Republican of Florida; Florida Governor Jeb Bush, another Republican; and Hillary Rodham Clinton, the Democratic frontrunner.
Rubio recently defended the U.S. sugar program at an event organized by major Republican donors Charles and David Koch. Bush wants to phase it out, according to a spokesman. The Clinton campaign didn’t respond to requests for comment.
Major sugar-users like PepsiCo Inc. and Hershey Co. have complained about the sugar program for years, saying it needlessly raises costs, both for them and for consumers. While a global production surplus has driven world sugar prices to their lowest levels since 2008, U.S. prices are much higher than elsewhere. A pound of domestic sugar fetched 24.45 cents yesterday on ICE Futures U.S., compared with 10.94 cents for a global counterpart. This week, the gap between the two was the widest since November 2011.
“The issue of sugar is one that is sensitive,” U.S. Trade Representative Michael Froman told Bloomberg this week. “We made clear that we won’t do anything that undermines our sugar program, but just as we are asking every other country to put everything on the table, we are also talking about what other steps we can take on the sugar area as well.”
Other sugar producers, led by Australia, say the U.S. must roll back support for its sugar industry for a TPP deal to get done. Other countries, notably Indonesia and Japan, also regulate the sugar trade.
The National Foreign Trade Council, a pro-trade group that includes Coca-Cola Co. and Wal-Mart Stores Inc., and the Sweetener Users Association, a collection of sugar-buyers, is holding a conference call with Australian sugar producers Monday to promote expanded U.S. access for foreign suppliers.
The American Sugar Alliance, the industry’s lobbying group, says other countries are making unreasonable demands, particularly given that the U.S. has already made some concessions. The TPP talks haven’t been held up by sugar, according to the group, which spent almost $2.2 million lobbying last year.
“Sugar clearly was not a sticking point,” the group said in a statement.
The Fanjul’s Florida Crystals didn’t return phone calls or an e-mail seeking comment. American Crystal, a Minnesota-based cooperative, and other sugar groups and growers referred inquiries to the American Sugar Alliance.
Representative Collin Peterson of Minnesota, the top Democratic lawmaker on the House Agriculture Committee and the leading recipient of sugar donations in his party, said international complaints about U.S. sugar are nothing new.
“Australia has wanted the U.S. to open up its market forever,” Peterson said. “I don’t think anything will make them happy.”