In 1992, Alfonso “Alfy” Fanjul, a Cuban exile-turned millionaire sugar baron, co-chaired former Arkansas Governor Bill Clinton’s presidential campaign in Florida. Six years later, Fanjul unwittingly became a footnote in one of the most salacious scandals in Washington history when the report of independent counsel Ken Starr investigating the Whitewater affair included his name. According to the Starr Report, the President apparently interrupted a liaison with Monica Lewinsky to take a call from Alfy, who wanted to complain about a proposal Vice President Al Gore backed to add a penny tax to sugar producers to pay to clean up the Florida Everglades. That tax never got through.
The story has become an inside-the-Beltway legend that illustrates the raw power of political influence, particularly that of American sugar producers, which include sugar growers and refiners. As a result of an active grassroots network spread over a relatively wide space, the sugar industry has historically been able to punch way above its weight politically. Its single-minded focus on protecting the Federal program that props up sugar prices and enables lavish amounts of campaign contributions from producers like the Fanjuls is a textbook case of successful lobbying.
But serious challenges loom for the powerful industry. The Farm Bill is scheduled to be reauthorized in 2007 for the first time in five years, giving opponents of the sugar industry, including competing commodities and candy makers, an opening to modify the sugar program to their benefit. In 2008, a provision of NAFTA delayed for 14 years will open the U.S. market to sugar imports from Mexico, a change that could send U.S. sugar prices plummeting.
If the sugar industry’s position is weakened next year, it would mark the downfall of one the most effective industry coalitions in the annals of Capitol influence peddling. But if any group should not be underestimated, it’s the sugar lobby. Few groups, in fact, have been as good at getting what they want from Capitol Hill and the White House.
Although the sugar industry accounts for few direct jobs in the United States, around 61,000, and amounts to only 1 percent of total agriculture receipts, it is responsible for as much as 15 percent of all agriculture-related PAC campaign giving, according to PoliticalMoneyLine, which tracks campaign spending. “It’s not that they have a lot of constituents across the country. It’s that they have a lot of money”, said one lobbyist who is often at odds with the industry.
The main result of all this giving has been a massive Department of Agriculture program that supports the sugar industry in three critical ways. First, the Department restricts the amount of sugar that domestic growers can produce by determining annual allotments. In return for the producers’ agreement not to grow more than they’re allotted, the Department restricts sugar imports to the United States to 15 percent of domestic consumption, and also administers a loan program that effectively acts as a price floor. But it’s not a sweet deal for everybody. A 2000 estimate from the Government Accountability Office said that the Federal loan program and restrictions on imports artificially inflate the price of American sugar and cost consumers of foods and drinks sweetened with sugar an extra $1.9 billion a year.
Congress first set import quotas for sugar in the Great Depression. The protection program expanded after Fidel Castro came to power in Cuba in 1959. Washington cut off sugar imports from that cane-rich country and expanded efforts to boost the domestic sugar cane industry.
Castro’s rise was significant in another way for the domestic sugar industry. It eventually led Alfy Fanjul’s sugar-growing family to flee their homeland for the United States. Shorn of their first sugar empire when Castro’s henchmen appropriated the land, the Fanjuls set about building a second sugar empire here. Today, the family is the largest cane grower and refiner in the country. They own 190,000 acres of sugar cane fields in Florida, and through their privately held umbrella corporation, Flo-Sun, they control about 40 percent of Florida’s sugar cane crop. Florida Crystals, a division of Flo-Sun, recently purchased Canada’s largest sugar company for $260 million with the Sugar Cane Growers Cooperative in Florida.
Now fabulously rich, the Fanjuls have garnered unwelcome attention from the news media, even as they refuse most interview requests. A lengthy Vanity Fair article in February 2001 described a years-long legal battle over how workers were treated on their cane fields. The subject is reportedly being made into a movie. The Fanjuls have also been criticized for contributing to pollution problems in the Everglades.
Despite the bad press, the family has been welcome in both political parties. José Fanjul, one of two brothers who run Florida Crystals, was a “Pioneer” fundraiser for George W. Bush, meaning he helped raise at least $200,000 for the President’s campaign. Previously, José was on Bob Dole’s finance committee. “One of the reasons why we get involved in American politics is because of what happened to us in Cuba”, Alfy Fanjul told Vanity Fair. A call to the Fanjul’s Florida Crystals spokesperson for comment on this article was not returned.
In 2006 alone, the Fanjul family donated nearly $400,000 to political campaigns, while Florida Crystals, a division of Flo-Sun, donated another $45,000. That may have been a wise investment considering that for a family like the Fanjuls, who own a significant chunk of the sugar cane fields and major refiners like Domino Sugar, it has been estimated that the current government program is worth as much as $65 million a year in extra profits. (The family has disputed that number in other press reports.)
Although sugar’s sultans can be found in places outside of the sunny cane fields of South Florida, they all stand ready to protect the victories they have won through a string of trade wars and skirmishes over the past years. Upper Midwestern sugar beet growers account for 55 percent of the sugar production in the United States and are a very active lobby. Congressman Colin Peterson is the new chairman of the House Agriculture Committee, and he has vowed to protect the industry. His Minnesota district produces more sugar than any other district in the country. In March, beet farmers were in Washington en masse going door-to-door on Capitol Hill to urge agriculture leaders to continue the current sugar program in the Farm Bill.
These are well-practiced folk. During the 2005 debate on the Central American Free Trade Area, sugar mounted such vigorous opposition to CAFTA that Congress only barely passed the measure, despite widespread industry and agricultural support for the deal. Although it represented a rare loss for sugar, the industry “was a very significant force. They were major players and very influential players”, said one senior Administration official who spoke anonymously because he was not commenting on behalf of the government. Sugar supporters sent some 70,000 letters to trade officials negotiating the trade pact.
Sugar’s influence during the CAFTA debate came ten years after a bitter international showdown with Mexican sugar growers during the NAFTA negotiations. Mexican sugar cane cutters were a driving force behind the 1910 Mexican Revolution. Nearly ninety years later, as U.S. and Mexican trade officials tried to resolve a lingering NAFTA dispute over sugar, the cane cutters made sure their opinion of the deal was well-known. Upset at the prospect of new competition from U.S. exports of high-fructose corn syrup, cane workers protested outside the building in Mexico City where the officials were meeting. Several waved machetes to emphasize their position.
As the cane cutters demonstrated in Mexico City, officials in the American sugar industry complained loudly that they thought unfettered Mexican sugar imports, the trade-off for Mexico opening its market to corn syrup, would ruin their current protections. Wielding money in the form of campaign contributions, the sugar industry called on its powerful Capitol Hill allies to pressure Clinton Administration officials. Lawmakers from sugar-producing states then called Administration trade negotiators into a meeting in the office of then-Senator John Breaux (D-LA) to complain about the ongoing negotiations.
“The industry was not pleased about how we were going about it”, a source familiar with the events said. The former trade official described this intervention on Capitol Hill as unusual, and it underscores the level of influence the industry has in Washington. The Mexican government decided to heavily tax soft drinks that use corn syrup, the subject of a subsequent trade dispute resolved only last summer.
American sugar policy has repeatedly complicated trade negotiations. Australia reportedly nearly walked away from a bilateral deal with the United States when sugar was taken off the table by the Americans. The sugar lobby argues that sugar policy should be worked out in broader arenas like the World Trade Organization. They say that other countries are able to produce lower cost sugar in part because of their own generous government subsidies. Brazil, for example, has invested billions of dollars to support its sugar-based ethanol industry.
Now with significant trade and farm policy legislation on the horizon, sugar is outspending its opponents by a mile. In 2006, the industry donated $2.7 million to congressional candidates, versus the $800,000 that sugar-user industries like candy makers donated. And sugar producers seemed to donate smarter, too: More than 60 percent of its donations went to Democrats, who regained control of the House and Senate, while sugar users gave more to Republicans.
In the new Congress, sugar supporters hold key slots on powerful committees. Democratic Senator Max Baucus of Montana, a beet-growing state, chairs the Senate Finance Committee, which has jurisdiction over tax policy. Peterson, from his perch atop the Agriculture Committee, will play a major role in shaping this year’s massive Farm Bill. Peterson said he has no interest in changing the current program: “We’re not going to close the safety net.”
But some lawmakers have gown sour on sugar. Candy makers in Congressman Mark Kirk’s Chicago-area district have cut thousands of jobs to relocate to countries where sugar can be bought more cheaply. A recent Commerce Department study found Chicago confectioners lost around 4,000 jobs over a five-year period: “Evidence suggests that sugar costs are a major factor in relocation”, the study said.
Sugar industry advocates won’t accept the blame, noting that Hershey Co. recently announced it would layoff 1,500 workers in the United States and build a new production plant in Monterrey, Mexico, where sugar prices are actually higher. “It defies logic to think that companies are closing because of sugar prices”, said Phillip Hayes, a spokesman for the American Sugar Alliance, an umbrella group of sugar producers. Confectioners have outsourced jobs for the same reason companies like Levi’s have: the opportunity to reduce labor costs. “There’s not much sugar in blue jeans,” Hayes said.
After the sugar industry’s CAFTA defeat, and in the face of more Mexican imports, sugar users, like cereal makers, have sensed an opportunity for a wholesale change to sugar policy in the Farm Bill reauthorization. The users’ proposal is to bring sugar in line with other commodities like corn, which gets a direct government subsidy, at a cost of $1.3 billion a year. The Department of Agriculture doesn’t support that approach. It favors the status quo, with one key exception. The Administration’s 2007 Farm Bill would give the U.S. Department of Agriculture more power to restrict domestic production in response to imports, something the industry opposes.
Given the level of uncertainty, why then would sugar reject a $1.3 billion subsidy? Direct subsidy payments to super-rich families like the Fanjuls would be politically hard to maintain, industry officials themselves acknowledge. A subsidy would also take away one of sugar’s main selling points: that the current system it operates under is effectively “no cost” to the government, unlike other farm commodity programs. That could be an especially salient point with Democrats promising austere budgets to reduce the Federal deficit.
Opponents say sugar producers don’t want a new deal because it wouldn’t be as sweet as the current program. As Congressman Kirk said, “If you are a powerful lobby in Washington, you can get a government subsidy. If you are a really powerful, you cut the government out and extract the subsidy directly from the consumer.”
That’s exactly what sugar has been able to achieve. But Kirk, who leads the 16-member Sugar Reform Caucus in Congress, believes that Big Sugar’s influence may be dissolving. He says that beginning in 2008, Mexican imports will make it impossible for the U.S. Department of Agriculture to continue to balance supply and demand in the carefully constructed domestic market. Eventually, the dynamics of the free market will take over, American sugar prices will fall, and candy jobs will return. “The sugar industry is now mortally wounded”, he said.
It isn’t yet clear that Mexican sugar will, in fact, have such a dire affect. For one thing, Mexican sugar, at 34 cents per pound, is actually more expensive now than American sugar, which sells at 25 cents per pound, although prices fluctuate. There is also some talk in Congress of directing any imports that do come in to the production of sugar-based ethanol. Minnesota’s Peterson believes that the U.S. producers will end up exporting more to Mexico than vice versa, given the price difference. His worry is that the Mexican sugar lobby will push their politicians to restrict imports of American sugar in response. “If they shut us out, we should shut them out the next day”, Peterson said.
Sugar policy is poised to further complicate trade deals with Thailand and with South American countries as part of a Free Trade Area of the Americas. Both trade deals are moving slowly for reasons other than sugar policy, but American protectionism of sugar almost always promises awkward negotiations for other commodities. “It is something our trading partners can point to and suggest that we are being somewhat hypocritical about in our calls for eliminating subsidies or tariffs”, the senior Administration official said.
But pressure to be fairer to foreign trading partners isn’t an argument that carries much weight on Capitol Hill these days, as the United States posts record trade deficits. The newest crop of Democrats largely ran against free trade deals, and a growing number of Republicans are skeptical, too.
After sugar’s aggressive opposition to the CAFTA agreement, there was talk on Capitol Hill that the industry had overplayed its hand; its intransigence had lost it friends. But there was little evidence of that in May 2006, when the House rejected overwhelmingly an attempt to lower the sugar loan program. “Our support on Capitol Hill is as strong as it has ever been”, says Hayes.
However, looming trade deals and growing agitation over domestic sugar prices mean that sugar, like other segments of the economy, is finally being forced to deal with the full effects of globalization. But given the history of the sugar lobby’s power on Capitol Hill, there is no doubt that producers like the Fanjuls will keep on raising cane, in more ways than one.