URGENT TRADE ALERT

CAFTA Negotiations Threaten U.S. Sugar Industry Survival

1. The Administration is pushing full steam ahead to conclude negotiation of a Central America Free Trade Agreement (Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua) by the end of this year – despite the obstructionist role played by most of these countries in the recent World Trade Organization (WTO) agricultural negotiations in Cancun, and despite Administration and Congressional pronouncements that such countries would be called to account for their actions.

2. The Administration has steadfastly maintained that domestic agriculture support programs should not be addressed in free trade agreement (FTA) negotiations, but rather in the WTO – a position strongly endorsed by the Congress. However, the Administration’s insistence on negotiating sugar tariffs and TRQs in FTA negotiations is inconsistent with this position and unfair to the U.S. sugar industry. The no-cost U.S. sugar program involves no subsidy payments. Domestic support, instead, is based on limits on imports from the grossly distorted and subsidized world dump sugar market.

3. Negotiating away sugar tariffs and TRQs in CAFTA and other FTAs will have a disastrous impact on the U.S. prices and producer income. The results will be massive USDA sugar loan forfeitures and government expenditures, inoperability of the no-cost U.S. sugar program, and destruction of our industry. CAFTA alone has an export availability of 2 million tons, the great bulk of which would likely be redirected to the U.S. market; the total export availability of actual and potential FTA candidates is over 27 million tons. This compares with U.S sugar production of roughly 8 million tons and consumption of less than 10 million tons.

4. The U.S. sugar industry, many Members of Congress, and Governors have urged that market access negotiations on sugar be excluded from FTAs and reserved for WTO negotiations. But the Administration clearly plans to include sugar, to eliminate tariffs on sugar in these negotiations, and to offer some immediate increase in access for CAFTA sugar exporters to the already saturated U.S. sugar market.

5. At the next formal round of CAFTA negotiations, scheduled for the week of October 20 in Houston, the Administration plans to put forward a specific offer on sugar. Once submitted, it will be virtually impossible to retract this offer.

6. Despite the Administration’s determination to put the U.S. sugar program on the table in CAFTA and other FTAs, it appears neither to have analyzed the impact of these decisions on the U.S. sugar industry, nor developed a plan as to how to deal with the harm to the U.S. sugar industry and the damage to the U.S. sugar program just approved by Congress in the 2002 farm bill.

7. The Trade Promotion Authority (TPA) bill, passed by Congress in 2002, requires close consultations between the Administration and Congress on sensitive agricultural products such as sugar, “taking into account the impact of any such tariff reduction on the United States industry …concerned.” We strongly urge Members of Congress demand that the Administration disclose its intentions concerning specific offers to be made on sugar, including an analysis of the adverse impact and its plan for addressing this impact, well in advance of the presentation of any offers – so that meaningful consultations may take place. These consultations and the Administration’s plan and analysis should encompass not just the CAFTA negotiations, but the whole of FTA negotiations in which the U.S. is involved.

8. A balanced agreement can be reached without the inclusion of sugar. The CAFTA countries already enjoy duty-free treatment on 95 percent of their exports to the U.S. as a result of the Caribbean Basin Initiative (CBI) – and these commitments will no doubt be permanently bound in the FTA negotiations. No concessions on sugar are needed to achieve a successful trade agreement.

U.S. Sugar Industry – October 1, 2003