There is no crop in the world more political than sugar. And no moment in the tenure of the Bush administration when passing a trade deal through Congress has been more important. Tragically, the political power of the American sugar lobby may well be sufficient to torpedo the ratification of the Central American Free Trade Agreement, in many ways the most important American trade arrangement of recent years.
There is no free market in sugar — everybody has a deal. For decades the Cuban economy leant heavily on the over-the-market prices paid by the Soviet Union. The Caribbean and African countries depend on special favors granted by the European Community. For long enough a number of Caribbean and Central American countries have relied on preferential access to the US. Nevertheless, the sugar producers — both southern cane growers and temperate zone beet farmers — that the EU, the US and Japan most favor with one means of financial support or another are their own, despite the fact over the years this has cost tax payers and consumers a small fortune. This government support has often pushed sugar prices below the cost of production and, as with so much other agricultural protectionism, has made it much more difficult for farmers in Third World countries to grow their way out of poverty. According to a new report by Oxfam, agricultural subsidies total around $250 billion a year, the same as they were in 1986 in real terms despite all the talk about aiding the poorer countries with their economic development. Indeed, as far as sugar is concerned, the “sugar-daddy” agreements of the rich countries have been, over the long run, more of a curse than a blessing.
So why should one support the Central American Free Trade Agreement? Because we must view it as a short-term stepping stone in the struggle against rich country agricultural protectionism. Added to that, it is the only deal presently on offer to the Central Americans that will ensure that their disadvantage doesn’t worsen. It may even improve their access to the American consumer — by a meager spoonful of sugar per week, according to one US government official. (It will also help stave off the wrecking effect of the recent surge of Chinese textiles’ exports.)
Fortunately, for the future, we have the growing political and legal muscle of the World Trade Organization, (as well as the uncertain and hotly debated prospects of the Doha Round discussions on a broad reduction of protectionism in agriculture). In April, responding to a well-argued legal case developed and presented by the Brazilian government (with support from Thailand and Australia), the international trade body ordered the European Union to stop dumping subsidized sugar in the global market place. It is only a matter of time before the organization’s guns are pointed at US sugar protectionism.
Already, we can see that the EU is beginning to give way under the strain of defending the undefendable. An internal European Commission study on sugar surfaced last week. It proposes that EU sugar production and dumping be reduced, with a 39 percent cut in the domestic sugar price. Italy would see its sugar growers closing down and Irish, Portuguese, Greek, Spanish, Danish, Finnish, Hungarian and Czech farmers would be compelled to significantly lower production.
According to the report’s figures, the benefit to Third World sugar exporters under these reforms will far overshadow the benefits promised in such schemes as the Central American Free Trade Agreement. Nevertheless, the latter is tangible, the law is written, and it just needs the votes in Congress. Moreover, the EU initiative could be torn apart and delayed by political opposition, at least in the short term. If the sugar lobby in Europe is not quite as powerful as its counterpart in the US, where it is the single largest donor among agricultural producers to political campaigns, it still smacks a hefty punch.
The Group of Eight, the world’s leading industrial nations, will be holding its summit in two weeks’ time, chaired by the British prime minister, Tony Blair. Blair wants to make the destiny of Africa and the other very poor countries of the Third World one of two central discussion points. By then the fate of the Central American Free Trade Agreement should be known. If Bush wins on that then America will be freer to give support to other trade-improving initiatives that Blair has up his sleeve. But if the too-powerful sugar lobby can shoot down this agreement in Congress then we can be sure that the prospects for the richer nations giving the Third World a chance of pulling themselves up by their own bootstraps is a less attainable goal than Blair thinks.
