The Wall Street Journal-20080122-Sweet and Sour
Return to: The_Wall_Street_Journal-20080122
Sweet and Sour
The last planks of the 1993 North American Free Trade Agreement were fully implemented on January 1, meaning that the continent's producers can now sell to a market of 425 million consumers. Then there are U.S. sugar growers, who are already reacting to this new era of competition by scheming to carve out a new continent-wide cartel.
For decades American sugar producers have prospered from a government-guaranteed price. To keep this from bankrupting Uncle Sam, Washington has controlled supplies with import quotas and allotments to growers. This has kept U.S. prices two to three times higher than the world price and sent thousands of jobs overseas, while a political cartel of Senators from the South (cane) and Midwest (beet) has beaten back every attempt at reform.
However, as of this month sugar imports can now enter the U.S. from Mexico, and so the sugar lobby is once again calling on Congress to fix prices and gouge consumers. Both the House and Senate farm bills contain provisions that Mexican sugar imports be purchased by the U.S. Department of Agriculture and then sold to ethanol producers while taxpayers eat the difference.
"We're going to be buying it at 21 cents [per pound] and probably selling it at six cents," acting Agriculture Secretary Chuck Conner told Dow Jones Newswires last week. "And that will be a direct cost to taxpayers to subsidize this creation of ethanol all for the purpose of trying to ensure that we don't have competition in the sugar market in this country."
The USDA says this scheme could cost taxpayers some $140 million a year, but that may be too optimistic. With U.S. high-fructose corn syrup -- a substitute for sugar in many products -- now flowing freely into Mexico, it's possible even more Mexican sugar might head North. All the more so if Uncle Sugar buys the surplus at a premium.
Even sugar growers can see the fuss this might create unless Mexican exports are restrained. So they are now circulating still another set of recommendations in Congress that would explicitly control the amount of sugar Mexico is allowed to ship to the U.S., and vice-versa. No new competition would enter either market. To supervise this cartel, the sugar lobby wants Congress to establish a new binational commission. The proposal would also ban the re-exporting of foods (notably candy) that use sugar imported from a third country, and would sharply limit how much sugar could come from third countries. In other words, sugar would be renegotiated right out of Nafta only weeks after it finally took effect.
U.S. antitrust laws prohibit producers from uniting to fix prices, so this scheme could certainly stand some legal scrutiny. But the larger issue is the message the U.S. would be sending if it allows a special interest to rewrite a trade treaty in this unilateral fashion. Mexico is unlikely to go along with this without reciprocity, such as new protection against U.S. exports for its politically sensitive corn and bean farmers. That would damage U.S. farmers, and might well kick off a series of demands for more protection on both sides of the border.
So Congress and the Bush Administration have to choose: Either defend the economic benefits from an integrated North American market, or bow to one of the world's richest and most destructive special interests.
