Sugar prices causing bitter battles over trade pact

Wednesday, June 29, 2005 | 9:26 a.m.

WASHINGTON -- President Bush ran into new problems with his trade agenda on Tuesday, as attempts to entice support from the sugar industry for a Central American agreement veered toward collapse.

With public anxiety already high about imports and foreign competition undermining American jobs, Republican congressional leaders are struggling to line up enough votes to pass the Central American Free Trade Agreement, which would cut trade barriers with Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and the Dominican Republic.

The inability to placate sugar producers, who are angry that the agreement would allow slightly higher imports, raises doubts about Bush's ability to push the trade deal through Congress. The president's problems, some lawmakers said, say as much about the weak support for trade agreements as it does about the strength of the sugar lobby.

Though sugar producers are heavy political contributors, their clout has been elevated because they have been able to turn Republican lawmakers against the party's leadership.

"It's not opposition of the sugar industry that's the main thorn in CAFTA," said Sen. Charles E. Grassley, R-Iowa, chairman of the Finance Committee. "The main thorn is that this is the only opportunity for people to vent their frustration over trade policy."

The Senate Finance Committee is expected to vote on the trade agreement on Wednesday, but the committee is so divided that Republicans may have to send the bill to the floor without actually approving it.

In meetings on Capitol Hill last week and again on Tuesday night, White House officials repeatedly tried to soften the opposition of sugar producers with side deals that would temporarily reduce the sting of the trade agreement.

Under the agreement, Central American countries would be allowed to export slightly more sugar. That could reduce U.S. sugar prices, which are higher than world prices because of the United States' existing import quotas.

Under one proposed side deal, the government would provide limited government subsidies for ethanol that is made from imported sugar.

In previous meetings, Agriculture Secretary Mike Johanns has suggested that the government could pay Central American sugar producers not to export to the United States and to pay with surplus American crops accumulated under other farm subsidy programs.

But sugar industry executives and their supporters in Congress have repeatedly rejected those overtures as short-term measures.

"With the administration seemingly unwilling to talk about any long-term solutions, I hold out little hope," a spokesman for the American Sugar Alliance, Phillip W. Hayes, said.

All but a handful of Democratic lawmakers have vowed to oppose the Central American agreement, complaining that it would merely accelerate the shift of American jobs to lower-cost countries without promoting high labor standards in those countries.

The deal has also aroused many Republicans, particularly those from textile-producing states like North Carolina or manufacturing states like Pennsylvania that have been battered by foreign imports.

Rep. Walter B. Jones, R-N.C., a leading opponent of the Central American pact, recently claimed that as many as 50 House Republicans could vote against it. Other Republicans predict far fewer defections. But even supporters of the deal say they will need every vote.

Johanns, the agriculture secretary, has met repeatedly with lawmakers from sugar-producing areas. But Johanns and Rob Portman, the U.S. trade representative, have refused to offer the long-term guarantees that sugar lobbyists have been demanding.

Sugar producers have been particularly insistent on an arrangement that would protect them not just from CAFTA but also from future trade deals affecting all of Latin America or other parts of the world.

One industry proposal would call for using "unneeded" sugar from Central America to subsidize ethanol production -- a move that would cost $100 million a year and probably much more if sugar import restrictions were reduced.

Sen. Craig Thomas, R-Wyo., a member of the Senate Finance Committee, warned on Tuesday that he would vote against the treaty if there was no deal.

Because the Senate Finance Committee is so divided, Senate leaders, who had been hoping to hold a floor vote as early as Thursday, are now contemplating a postponement until after the July Fourth recess. In the House, Republicans face even steeper opposition.

"It's extraordinarily tough to pass this with sugar's unanimous opposition," said Rep. Mark Foley, R-Fla., who represents sugar producers and has been trying to broker a deal.