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Federal subsidies under fire
Refiners, legislators say quotas to protect sugar farmers from foreign competition have produced a glut of sugar
By John Simerman, Contra Costa Times
June 1, 2001
 
CROCKETT -- The stout old factory rises up from the Carquinez shoreline, keeping stubborn watch over one of the East Bay's sleepiest towns. The C&H sugar refinery stands as a paean to America's undying sweet tooth.

Behind its red brick walls, the century-old building pumps out 3,000 tons of sugar a day. One-ton "supersacks" settle in for a journey to the soft cores of sweet Jelly Belly jellybeans. Liquid sugar rolls off by the truckload. Sugar cubes line up, waiting for a cup of coffee.

What is missing, amid the musky hint of molasses is a bustle of humanity. The only cane sugar refinery on the West Coast now employs 500 men and women over three shifts, compared to 1,800 at its modern peak.

Such factories, once economic engines of towns like Crockett, keep scaling back or closing. Of the 22 U.S. cane refineries operating in 1981, 10 remain. Earlier this year, the nation's largest refiner, Imperial Sugar, filed for bankruptcy.

The trouble is not with America's taste for sugar, which grows steadily. Instead, C&H and others argue, it is with the federal sugar program, a set of import quotas and loan programs designed to protect sugar farmers from foreign competition.

The current program, most everyone agrees, has soured.

Last year, a glut forced the federal government to swallow loads of forfeited sugar in lieu of crop-loan payments. The government now spends about $1.4 million a month to store nearly 800,000 tons of sugar, about four-fifths of what California consumes in a year.

Meanwhile, refiners have been sandwiched between the high cost of raw sugar and depressed prices for their refined product.

"It's become very clear that this is a threat to the workers," said Rep. George Miller, D-Martinez. "I wouldn't say it's going to happen tomorrow or six months from now. But they're getting hit now with high energy prices and high raw sugar prices. That's a reason to be concerned."

Next week, Miller and Rep. Dan Miller, R-Florida, plan to introduce a bill to phase out the federal sugar program over three years.

The issue pits refiners and confectioners who bemoan the program, against growers and unions who claim the U.S. sugar industry would collapse without it.

"This whole industry's on its ear. I'm sympathetic to (the refiners') plight, but without the sugar program we would be gone," said Ben Goodwin, executive manager of the California Beet Growers Association.

Sugar beet acreage in California has dwindled from about 250,000 acres a decade ago to just over 50,000 acres now. "Without the program, there wouldn't be a sugar beet industry in California, and there probably wouldn't be much of a sugar beet industry in the United States," he said.

Refiners like C&H have struggled on and off since the early 1980s, when Coke and Pepsi switched to high-fructose corn syrup, killing off some refineries.

C&H CEO David Koncelik said the sugar program has cost about 400 company jobs over the past decade. In 1996, the company laid off about 240 workers, or 30 percent of its workforce. New technology has made some of those losses permanent.

In Washington, efforts to do away with the sugar program have become an annual practice in futility for critics of a policy dating back to the New Deal. Lately, though, they may be gaining new momentum.

Last year was the first time taxpayers footed a direct bill -- more than $400 million -- to support the price of sugar. The federal General Accounting Office, meanwhile, estimated the price supports cost American consumers about $1.9 billion. Chicago Mayor Richard Daley has begun to attack the program, fearing the loss of jobs when candy manufacturers flee to other countries.

On the other side of the equation, President Bush won strong voter support from states with heavy agriculture.

With wholesale sugar prices at a 22-year low, sugar producers are pulling for a stronger sugar program that would police imports and give the USDA more control over domestic production.

Sugar producers blame some of the glut on a jump in imports from Mexico, minimum imports required under international trade agreements, and on sugar "dumping" into the U.S. market. Those factors, along with three years of good weather leading to bumper crops, has produced a nation awash in sugar.

U.S. producers claim they cannot compete in a world sugar market subsidized by countries with lax environmental and labor standards. Sugar costs about half as much outside U.S. borders.

"It's an embarrassing time for them to bring it up because our prices are already so low, and we're hurting so badly," said Jack Roney, head of the American Sugar Alliance, a lobbying group for producers. "All they can do is kick us while we're down. What we need to do is get control over this market."

Opponents of the sugar program argue it has seeded a "corporate welfare" system benefiting a few big growers, and overproduction in environmentally sensitive areas such as the Florida Everglades. Import quotas, they say, undercut free trade, hampering America's efforts to free up international agricultural markets.

"You can't enter negotiations with clean hands," said Rep. Dan Miller. "It's one of the few products we're having to defend and protect."

Currently, America grows about 85 percent of its sugar domestically, split between sugar beets and cane. Sugar beets are grown largely around Michigan, Minnesota, North Dakota, Nebraska and Pacific states. Cane grows mostly in Florida, Louisiana, Texas and Hawaii.

Supporters of an overhaul say their best chance comes every five or six years, when Congress takes up the farm bill. That may come this fall, but more likely next year.

By all accounts, they face an uphill battle. In the 2000 election cycle, sugar producers gave more than $3 million to federal candidates.

"Don't ever underestimate the farm lobby fraternity," said Rep. George Miller. "When you're talking about (the program) to members of Congress, the reaction is, 'This is crazy.' When it comes time to vote, it's not exactly the same reaction."

The sugar program also finds support among labor.

"Thousands of jobs would be eliminated in this country and we'd be importing from many countries where you get sugar that's produced by child labor or exploited labor," said Lindsay McLaughlin, legislative director for the International Longshore & Warehouse Union.

"You've got thousands of minority workers making well above the average wage. These are not stoop-labor jobs. They're good jobs."

The union represents 1,100 sugar workers in Hawaii -- down from 5,000 in 1996 -- and about 100 workers at the Crockett refinery.

In recent years, sugar cane farming in Hawaii has spiraled downward, from 1 million tons of raw sugar per year to 300,000 tons. C&H, which started as a co-op of Hawaiian farmers in 1905, relies more and more on sugar imports.

Opponents of the sugar program agree that a phase-out would spell a drop in sugar farming, and job losses. To them, the alternative is worse.

"The road we're going down now is overproduction and huge costs, buying sugar and no way to get rid of it. At some stage people are going to say, 'Why are we giving out million-dollar checks," said Rep. Dan Miller. "I'm just not sure this is the year."