NOT even John Howard’s comradeship with George W Bush could dissolve the power of the US sugar lobby, which will now become a crucial part of free-trade negotiations.
Nanjing Night Net

In Washington, a renewed push by a group of bipartisan senators last week will have caught the attention of Australian trade negotiators as they seek to hammer out the final details of the Trans-Pacific Partnership (TPP).

The proposed Sugar Reform Act aims to ditch the costly protection of American sugar growers that has virtually shut out Queensland cane growers from the US market.

The featherbedding of the US sugar industry is a symptom of almost everything that is wrong about American politics: the influence of money, special interests and lobbying. It highlights how the United States is not always the bastion of free market capitalism many assume.

Strategic donationsSugar represents about one per cent of the US agriculture sector, but accounts for about 20 per cent of the farm industry’s political campaign contributions.

In the 2014 congressional election cycle, individuals and political action committees associated with the sugar industry contributed $US5.5 million ($7 million), almost evenly split between Democrats and Republicans, according to OpenSecrets.org.

The sugar money has been sprinkled strategically. Senator Thad Cochran, chairman of the appropriations committee and member of the agriculture subcommittee, received the largest contribution of $US81,500 from the sugar sector, OpenSecrets.org says.

The second-top recipient with $US71,400 was Collin Peterson, a ranking member of the House agriculture committee and representative for the sugar-beet rich Minnesota. Fourth with $US54,400 was Senator Charles Schumer of New York, a member of the finance committee that writes legislation for trade agreements.

In other cases, members of Congress who have no sugar interests in their State but have an important vote on legislation received substantial donations.

To be sure, this is not illegal and it is not to suggest votes are being bought. But political contributions do, at a minimum, enhance access to key decision makers in Washington.

Robb’s uphill battleTrade Minister Andrew Robb, who has already nailed three free-trade deals, will be acutely aware of the uphill battle he faces to enhance market access for Australian sugar growers under the TPP. As a former head of the National Farmers’ Federation (NFF), he is fighting the good fight.

Yet not even John Howard could convince his good friend George W. Bush to remove the sugar import barriers in the 2004 US-Australia free-trade agreement.

The crucial swing state of Florida, which Bush clinched in the 2000 presidential election against Al Gore, is a major sugar-producing region. Florida is home to the billionaire Fanjul brothers, Cuban migrants who own major sugar companies.

Alfonso Fanjul was the co-chairman of Bill Clinton’s Florida campaign in 1992, while his brother Pepe was vice-chairman of finance for Republican Bob Dole’s presidential campaign in 1996.

Both have helped raise funds for the Democratic and Republican parties and are said to hold enormous sway in Washington.

As an aside, Florida also happens to be the home state of former governor Jeb Bush, an early front-runner for the Republican presidential nomination.

Under the current restrictions, US sugar producers are guaranteed at least 85 per cent of domestic sugar demand.

Australia’s quota of 87,000 tonnes is relatively paltry.

If sugar prices fall below guaranteed levels, the US government buys surplus domestic sugar and sells it to ethanol companies at a loss. In 2013, the sugar sector pocketed almost $US300 million of taxpayer bailouts.

The largesse means not only are US taxpayers forking out money, but US food businesses using sugar as a key ingredient, from The Coca-Cola Company to Kellogg’s to Kraft and the local corner bakery, are paying higher prices because of the block on foreign competition. So are consumers.

Fed up with mollycoddlingSome US politicians from outside sugar-producing states are fed up with the mollycoddling. Senators Jeanne Shaheen, Mark Kirk and Pat Toomey, backed by 14 other senators, last week put forward the Sugar Reform Act to roll back the sugar program.

The trio, who represent States that are home to companies including Lindt Chocolate, Mars, Nestle and The Hershey Company, argue it has cost consumers and businesses up to $US14 billion since 2008.

The US Department of Commerce found in 2006 that for every sugar-growing job saved, three were lost in the sugar-using sector.

In positive news for Australia, the senators have written to the US Trade Representative urging the US to use the TPP negotiations to “dismantle these harmful and unnecessary restrictions”. They note sugar was the only product to be excluded from the US-Australia free-trade agreement.

The campaign is the latest salvo in a long-running battle by the three senators. An attempt in 2013 to end import restrictions on sugar was defeated 54 to 45 in the Senate.

But Australian cane growers should not get too excited yet. The latest freestanding bill needs to get through the agricultural committee (stacked with members who represent the growers) and must be attached to another Senate bill for senators to vote on.

Washington insiders are not expecting Congress to pass the proposed law change any time soon.

Furthermore, former George W. Bush adviser Michael Green and former Obama international economics adviser Matthew Goodman both told me last year they were not optimistic about the US opening up major new opportunities for Australian sugar via the TPP, because of the domestic politics of sugar.

Whether Australia wins at least some better sugar access will probably depend on the extent to which Robb grants more favourable intellectual property rights to US pharmaceutical and entertainment firms.

The politics of sugar is not only bad for Australia, but is an embarrassment to the US as the champion of free markets.

John Kehoe is the Washington-based US correspondent for The Australian Financial Review.

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