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What do Cory Aquino, cocaine addicts, and Americans consumers have in common? They are all victims of the U.S. sugar program.

What Do Cory Aquino, Cocaine Addicts, and American Consumers Have in Common?

Quentin Burdick, a crusty, 79-year-old U.S. senator from North Dakota, was back in a homestate office late in August. A small group of farmers had stopped by, and after 27 years of representing one of the most rural states in America, Burdick knew just how to handle them. His gravelly voice rumbled with suitable outrage over Reagan's farm policy, and then, poised to extend sympathy, Burdick turned to a young farmer and asked how he was managing financially.

The farmer blushed. "Oh, he's doing fine,' a friend quipped. "He's got sugar beets.' They all laughed, and the young farmer looked down, embarrassed to have it so much better than his neighbors.

In this case, you can forget all you've read about the farm crisis. Sugar beet farmers aren't the ones showing up on courthouse steps for bankruptcy auctions. Beet farmers, along with those who grow sugar cane, the other crop that can produce white table sugar, form a tightly knit group of 12,000 that quietly enjoys the sweetest deal in the farm belt.

You probably have heard about the sugar program. It's one of those wrong-headed federal policies that comes in every now and then for a haphazard bashing under the general category of waste, fraud, and abuse. But such broadbrush criticism does not do this unique program justice. How often do you find a government policy that costs grocery shoppers $3 billion annually, jeopardizes Cory Aquino's future, affects the taste of our soda pop, stimulates the Third World's illegal narcotics industry, undermines the Caribbean Basin Initiative, and actually hurts sales of the product it's supposed to protect?

That's quite a coup, particularly for a tiny program that helps only 10,000 sugar beet farmers and 2,000 sugar cane growers, many of them well-to-do businessmen who fit the traditional image of America's struggling family farmers about as well as J.R. Ewing does that of the average oil wildcatter. It's not surprising many sugar growers turn beet red when someone starts looking at the sugar program closely.

To appreciate the envy other farmers might feel, you have to understand how the sugar business works. By using quotas to severely limit the amount of cheaper foreign sugar allowed into the United States, the government props up the domestic price to about 20 cents a pound, more than three times the world price. Then the domestic industry helps maintain the high prices by limiting the number of farmers who grow beets and the number of acres they grow.

Let's say a young farmer in North Dakota's Red River Valley reaches the obvious conclusion that sugar beets could be his ticket to prosperity. (While sugar cane is grown primarily in tropical areas, sugar beets thrive in the midwest.) This North Dakotan is a good farmer. He has a diploma in agronomy from the local land-grant university hanging on the wall. He's certain he could raise a healthy crop of beets.

But he can't. Not without a contract with one of the beet processing factories that are the crop's only market. These factories, many of them owned by the growers themselves, come back to the same farmers year after year for sugar beets. If our young farmer is persistent, he'll have to buy a contract from an existing grower. Last year, in the middle of agriculture's worst depression in 50 years, farmers were paying $700 an acre for the right to sell an acre's worth of beets. You could buy land for less than that.

There is a long list of farmers waiting for a chance to sign on with beet factories. A few sugar beet farms in California are owned by big corporate entities, but most of the country's beet farms are run by families in the midwest and plains states that have been fortunate, persistent, or wealthy enough to land a contract. The business operates a little differently with sugar cane. It is grown mostly by large cane processors and growers--five companies control 95 percent of the Hawaiian cane industry, for example-- but the result is the same: not everyone with a strong yeoman's work ethic can be a sugar farmer.

Pricey ice cream

The sugar price has to be kept high artificially because the United States is a pretty lousy place to raise sugar. The climate in most of the country can accommodate only beets, which have to be diced up and cooked to make sugar, costing as much as 40 percent more than milling sugar cane. But even U.S. cane growers can't compete with farmers in Central America. "This is a major industry in which the developing tropical countries have one of their few natural advantages,' notes Dennis Avery, the State Department's senior agricultural analyst.

To compensate for America's comparative disadvantage, the federal government has been protecting the nation's sugar farmers for almost 100 years. Starting with the McKinley Bill of 1890, which paid American growers a bounty of two cents per pound of sugar to promote the fledgling sugar beet industry, Congress has approved sugar act after sugar act to protect these farmers from international competition. Only twice, in 1975-76 and 1980-81, when worldwide sugar shortages sent prices sky high, did the growers attempt to sell sugar without government protection. Both times a glut ensued, world sugar prices tumbled, and the growers quickly scampered back under Uncle Sam's umbrella.

And as U.S. sugar production inches upward, the import quotas will likely get tighter. (It's almost impossible to keep farmers from improving their yields annually.) Only 1.1 million tons of sugar will be allowed into the United States in 1987, according to the Agriculture Department, down from more than 4.8 million tons in 1980. Agriculture officials estimate sugar imports will be down to zero by 1990.

The growers are benefiting from blatant protectionism, of course, the kind for which we regularly bash the Japanese. Sometimes, as with the U.S. steel companies, trade quotas can give an industry time to retool, cut costs, and face up to the future. We trade a slight increase in kitchenware prices for jobs in Gary, Indiana. Not a bad bargain.

In the case of sugar, however, the scales are a bit out of balance. On one scale we have the 12,000 farmers, 2 percent of America's 600,000 commercial farmers. The other scale is spilling over with losers.

First, there's the American consumer. The growers proudly boast that the program doesn't cost taxpayers a cent because they aren't getting direct subsidies from the government. But in effect the inflated price is an excise tax you pay at the grocery store--about $3 billion annually.

You pay every time you bite into a candy bar or ladle a spoonful of sugar on your cornflakes. Your gallon of ice cream costs about ten cents more than it would were the U.S. sugar price at world levels. A five-pound bag of sugar costs three times what it might without the price supports. "We could afford to pay every sweetener grower in the United States almost $250,000 in cash and it would be cheaper than extracting the high prices for sugar the current law requires,' claims Linwood Tipton, a spokesman for a coalition of consumer and business groups that oppose the sugar program.

Cane and cocaine

Then there's American foreign policy. Although public criticism of the sugar program almost always focuses on the cost to American consumers, the greater price is being paid abroad. No one knows this better than Philippine President Corazon Aquino, most of whose problems are rooted in a sickly economy.

Say you're an out-of-work sugar cane cutter in the Philippines. Your nine brothers and sisters are urging you to get a job so they can eat. But you've been waiting for work for more than a year and your prospects don't look good. After all, there are about 250,000 other unemployed cane cutters in the Philippines. What do you do? Well, a fair number of you have wandered into the jungle and joined the communist insurgency. Would you come back for a job? As long as the U.S. sugar program is around, we're not likely to find out. "If we would allow them to regain their sugar market, it would be very, very helpful. They're so desperate right now economically. This is one of the areas where we could help them without cost to the U.S. taxpayers,' says Ralph Harding, a Washington lobbyist for the Philippine sugar industry.

Just give the Filipinos a "level playing field,' and their business will boom. They produce sugar well under the world price while ours is well above it. Growers from Brazil, the Dominican Republic, several small Caribbean nations, and Australia enjoy advantages similar to those enjoyed by the Philippines.

Now suppose you're a sugar farmer in Belize. The sugar mill has closed and sugar cane growing is pointless because of the U.S. quotas. What do you do? Grow marijuana. State Department officials say that without sugar cane, farmers in tropical nations are increasingly turning to growing marijuana and the coca plant, the raw product for cocaine. In Belize, local officials petitioned the Reagan administration for help, warning that the sugar farmers would practice an unfortunate style of crop diversification. "They had a sugar problem. Now there's a narcotics problem,' a State Department official dryly observes. Sugar cane once provided badly needed export earnings and jobs for many poorer nations, including most of the countries the United States is trying to help through President Reagan's Caribbean Basin Initiative, the one, the president said, has as its "centerpiece' a program of "free trade for Caribbean Basin products exported to the United States.'

A nice idea. The U.S. State Department shells out foreign aid to help Caribbean countries repair economies that have been devastated by the policies of the U.S. Agriculture Department. In 1981, those countries sold $603 million worth of sugar to the United States. By 1985, that total had fallen to $263 million. During the same period, American foreign aid to those nations climbed by $427 million to $1.2 billion. "It's a bad joke. That the United States would put forth a Caribbean Basin Initiative and then withdraw an even greater amount than the [Caribbean Basin Initiative] offers from their economies through our sugar program,' says Avery of the State Department.

But don't think the U.S. doesn't have a heart. To atone for cutting sugar imports, we ship government surplus food stocks to several Caribbean countries. The Dominican Republic, the largest beneficiary, received $46 million worth last year, much of which fed, you guessed it, out-of-work cane cutters.

So, to summarize the international effect of our sugar policy: America ships food to the Dominican Republic to feed farm workers who are going hungry because they can't sell to the United States the one crop they grow well. U.S. taxpayers pay to ship surplus food to the Caribbean at the same time they pay, as consumers, for the higher sugar costs that result from keeping the cheaper foreign sugar out, not to mention the social costs of cocaine addiction.

Oh, I almost forgot. In a desperate effort to revive their economy, the Dominican Republic has begun selling low-cost sugar to the Soviet Union.

If none of this moves you, I have one more plea: think about the poor United States sugar industry. The great irony of the sugar program is that in addition to hurting the rest of the world, the price supports are slowly destroying the sugar market in the United States. The price is so high that food and beverage companies are turning to corn syrup and other sweeteners. Beet and cane sugar used to be the principal ingredient in soda pop. Not anymore. Even Classic Coke uses high-fructose corn syrup as a sweetener. The corn sweetener price is pegged just below the sugar price. Not surprisingly, the Corn Growers Association has become one of the biggest boosters of the sugar program in Congress.

The switch from sugar to other sweeteners, along with the tightening of the quotas, has hurt not only growers but sugar refiners. For example, eight out of 22 cane sugar refineries have gone out of business since the latest, most restrictive sugar quotas became law in 1981.

If America continues to satisfy its sweet tooth with other sweeteners and the sugar price starts to fall, cane and beet sugar will begin showing up in government warehouses. Processors have the option of defaulting on federally guaranteed loans if the price tumbles below profitable levels. What then? Perhaps we'll have government programs to give homeless people free chocolate bars.

Rat food

You might have guessed by now that the sugar program drives the State Department a little crazy. President Reagan doesn't like it much either and has tried to change it since he got into office. Consumer groups loathe it, as do candy and cereal companies and many of our allies. You're probably wondering why the program is still around.

Meet Horace D. Godfrey, the "godfather' of sugar lobbyists. With his easy smile, soft Carolinian accent, and big diamond stick pin confidently set in the middle of his tie, Godfrey is one serene lobbyist. He's happy to sit a spell and chat about the government's sugar program and its "friends' on the hill. The list gets so long I set down my pen and simply listen in wonder. On the wall in Godfrey's Washington office are a plaque honoring him as one of the 100 most influential men in Washington and a chrome-plated sugar cane cutting knife. A fitting tribute, since the godfather and the sugar lobby have been chopping up the opposition for years.

Godfrey, age 72, has been in Washington 27 years. He describes himself as "the oldest rat in the barn.' If that is so, the sugar cane and beet farmers whose interests he promotes are the fattest rats in the barn, kept that way by Uncle Sam.

Yes, there has been a seven-year depression in the farm belt. And for many it has been tragic. But when the national media focuses on something, perspective tends to flatten out. The problems of some farmers become the problems of all farmers, even those who have experienced sweet times. "American agriculture is in the worst depression I've seen,' said Rep. Jerry Huckaby, a Louisianian who chairs the House Agriculture sugar subcommittee. "Do we force these farmers who are holding their own into a depression? I have to go with the American farmer.'

So when farm bills have come to the floor of Congress in the past few years, legislators, justifiably preoccupied with the plight of wheat and corn farmers, have left sugar alone. It didn't hurt, of course, that sugar growers' political action committees doled out $2.1 million to members of Congress during the past two national election campaigns. "We've been to bat several times,' Godfrey observes. "We've won with more than two-thirds of the vote every time!'

His success illustrates a simple truth about congressional politics: a well-organized minority, even one as miniscule as 12,000 farmers, almost always wins out against the less-focused desires of the great majority. Members of Congress know that a few constituents may grumble, but no one is going to vote a congressman out of office because of the high price of Hershey bars. On the other hand, lawmakers can count on sugar growers raising Cain on Capitol Hill when anyone mentions touching the quotas.

In fact, the current sugar program is so solidly in place that the Reagan administration had to struggle last year to find anyone in Congress willing to introduce a change (a modest attempt to change the loan rate but compensate growers with direct payments). Rep. John Porter, a Republican from a suburb of Chicago who has no farmers in his district, finally agreed to lend his name to the bill.

Not surprisingly, the legislation went nowhere. "This is about what I expected,' Porter said. "It was referred to the Agriculture Committee, where it disappeared.' Even though Porter hardly has been out front pushing the bill, he's received letters from a few voters in his district, employees of companies with strong agri-business connections, telling him to leave sugar alone. The different agricultural commodities stick together; tobacco lobbyists will back up sugar lobbyists and vice versa. Prick any part of the agricultural lobby and the ungainly beast reflexively swats back. When Sen. Bill Bradley tried to cut the sugar program in 1985, corn farmers came to its defense and in turn gained sugar-state legislators' help with their farm bill problems.

Ironically, the current tough sugar quotas Bradley and Porter have fought wouldn't even exist if it hadn't been for the Reagan administration. In 1981 it was initially fighting to block a bill that strengthened the sugar quota. But in the last frenetic minutes of the debate over Reagan's first budget, a desperate David Stockman, then director of the Office of Management and Budget, fearing he was a few votes short, began handing out legislative goodies right and left to round up support. Louisiana Rep. John Breaux, now a senator, was the prime "shakedown artist' on the sugar import quotas, according to Stockman. Breaux and other sugar-state congressmen demanded that the administration drop its opposition to the quotas in return for their votes on the budget. With time running out, Stockman agreed to support the quotas, a deal "that turned his stomach,' and prompted Breaux's now-classic quote: "I can't be bought, but I can be rented.'

Sleeping better at night

I grew up in North Dakota, and I've known and interviewed a lot of farmers over the years. They're a remarkably stubborn lot, and most have continued to insist, right through hard times, that American farms can lick anybody if given a fair chance. Many sugar beet growers, though, don't pretend they could survive on their own. Unlike the steel manufacturers, who envision a day when American steel is again on top, sugar farmers rarely boast they will some day best the competition. They argue they should never have to face it. "If we had to go to world prices, we wouldn't have a sugar beet grower left in the United States. You'd just fold them all up,' says Rodney Schmidt, a Minnesota farmer.

It's true that if the sugar program disappeared tomorrow, the economies of the Red River Valley and a handful of other locations would suffer. Although the government could help ease the transition, there's no denying that sugar farmers would be hurt by the elimination of the sugar program. They could turn to other crops, but raising wheat, barley, and soybeans these days is also a tough way to make a living.

It comes down to a simple case of weighing the interests of the few against those of the many. The sugar program should be dumped. If nothing else, the sugar farmers might get some satisfaction out of knowing they've helped 230 million American consumers, starving peasants in roughly 30 countries, democracy in the Philippines, and maybe even a few drug addicts in New York. They could even join their friends in complaining about the farm economy without blushing.
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Author:Karaim, Reed
Publication:Washington Monthly
Date:Nov 1, 1987
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