Australia faces pushback in its quest for a bigger piece of U.S. sugar market

WASHINGTON – Leaders of the Australian sugar industry made a pitch to reporters recently. They said their country should be allowed to expand sales of sugar to the United States as part of the Trans Pacific Partnership, the free-trade agreement now being negotiated by a dozen Pacific Rim countries.

The case for letting the agreement — known as TPP — open the U.S. market to more Australian sugar makes sense, said Warren Males, chief economist for Canegrowers, the trade group representing about 80 percent of Australia's sugar producers, "if you take the politics out of it."

The problem for the Aus­sies and anyone else who tries to buck the United States' muscular sugar lobby is that politics can never be removed from the equation.

Australia is the latest country to try to use a free-trade agreement to break through the program of fixed prices, loan guarantees and import quotas that protect the U.S. sugar industry, including Minnesota's nation-leading sugar beet producers.

Virtually everyone else has failed. Even the Mexicans who supposedly won unlimited access to the U.S. sugar market under the North American Free Trade Agreement got hammered by the sugar lobby in an unfair trading case in 2014.

"I think the Australian government made it clear that sugar is a key item [in TPP]," Dominic Nolan, CEO of the Australian Sugar Milling Council told reporters on a conference call. Nolan could not say if failure to adequately expand access to the U.S. sugar market was a deal breaker for his country's support of TPP.

Meanwhile, there is no doubt that expanding Australian access beyond a certain level could be a deal breaker for U.S. sugar producers and their Congressional backers who get to vote on TPP.

The U.S. is projected to produce 8.45 million tons of sugar in 2015-16. Australia is projected to produce 4.8 million tons in the same period.

Rep. Collin Peterson, whose U.S. House district spans most of Minnesota's sugar beet fields, called the notion of an undersupply in U.S. sugar "nonsense."

"We could easily produce the amount of sugar needed in the U.S. without any imports," Peterson maintained.

The Obama administration has "got enough trouble with this [TPP] agreement without getting the sugar people upset," he said.

Peterson said the U.S. trade representative's office has told him that U.S. negotiators "might give [the Australians] something, but it won't be substantial, something the [U.S. sugar] industry could live with."

Minnesota's U.S. senators, Amy Klobuchar and Al Franken, stand squarely in defense of the state's sugar beet industry.

"Currently, 40 countries are allowed to import sugar to the U.S., including Australia, so they already have access to our market," Klobuchar said in a statement to the Star Tribune. "The global sugar supply remains at a surplus, and prices are currently low. I have concerns about Australian proposals to increase access because Minnesota is the number one producer of sugar beets in the country and sugar beets employ tens of thousands of people in the Red River Valley. These jobs are important to our state."

In a statement, Franken said the U.S. sugar program "supports thousands of jobs in our state and provides billions of dollars in economic benefit to the entire region. As our sugar producers continue to address the illegal dumping of sugar from Mexico into domestic markets, I believe that this is the wrong time to be increasing imports from other countries like Australia."

Even as they push for increased U.S. sugar sales, the Australians know what they are up against. The U.S. sugar program provides America's growers and refiners billions of dollars more per year in economic benefits than they would receive "if exposed to the world market," Males contended. But, he added, while sugar makes up less than half of 1 percent of U.S. agriculture, its lobby contributes very heavily to the election campaigns of members of the U.S. Senate and House.

In recent election cycles sugar program supporters have donated to hundreds of U.S. Senate and House candidates, not just in sugar-rich states like Minnesota, but all over the country. The sugar lobby is most generous with members of the Senate and House agriculture committees who play the largest role in setting policy.

University of Minnesota economist Tim Kehoe thinks the U.S. sugar program is outdated and hurts American consumers and food-producing businesses. Like many economists on the left and right, Kehoe thinks the program should be scrapped. There is no question in his mind that letting the Australians sell more sugar in the U.S. will bring prices down. But Kehoe, who helped the Mexicans negotiate the North American Free Trade Agreement 20 years ago, has watched the sugar lobby push opponents around for decades.

They may not have the clout of the seemingly all-powerful National Rifle Association, which defeated gun control legislation in the wake of the slaughter of Connecticut schoolchildren by a heavily armed teenager, but they are tending that way, said Kehoe. Politicians are "not going to pick a fight with the sugar people."

The Australians are trying not to, either. But it's hard.

As the Trans Pacific Partnership negotiations continue, the Aussies have floated the idea of selling 750,000 more tons of sugar in the U.S. per year.

"The central point of the Australian argument is there is plenty of scope [in the U.S.] for Australian sugar," Males insisted.

Males based his analysis on USDA figures that show growth in demand for sugar that he believes Australia can meet without hurting U.S. producers.

In his sugar beet fields near Willmar, Minn., Mark Olson begged to differ.

"My two cents is that Minnesota beet growers are going to be facing a crop where we're going to have to leave some [beets] in the field because we can't harvest it all," said Olson, treasurer of the American Sugarbeet Growers Association.

The hope of free trade advocates such as the National Foreign Trade Council and the Sweetener Users Association, who helped organize last month's Australian news conference, is that TPP is such a large agreement with so many trade issues that sugar will not be, as Trade Council President Bill Reinsch put it, "decisive."

Kehoe said the usual rules may not apply.

"It's the sugar lobby, not just 12 to 15 congressional districts where this is a big deal," he said. "It's not an economic question. It's a political question."

No one can say for sure if the U.S. sugar lobby will affect TPP the way it has driven bilateral trade agreements in Central and South America in recent years.

By itself, "the sugar issue in this case would not be able to derail a deal of this size," said congressional expert Norman Ornstein of the American Enterprise Institute. But if the yes-or-no vote on TPP gets tight, as it could with union-backed Democrats allying themselves with protectionist Republicans, Ornstein said votes from representatives of sugar-producing states could make a difference.

In any case, Ornstein noted, "the sugar lobby has punched above its weight in this country."

Peterson offered a hint of his resolve.

The congressman said he traveled to Australia a few years ago after that country had dismantled its sugar program. As his hosts sang the praises of the free market, Peterson said an old farmer motioned him behind a barn out of earshot of others.

"He told me, 'Never give up your sugar program,' " Peterson recalled. "I took that to heart."

Jim Spencer • 202-383-6123