Letter Opposing U.S. Sugar Policy in H.R. 2419, the Farm Bill

March 5, 2008

The Honorable Tom Harkin
Chairman
Committee on Agriculture, Nutrition and Forestry
United States Senate
328A Senate Russell Office Building
Washington, DC 20510

The Honorable Collin Peterson
Chairman
Committee on Agriculture
U.S. House of Representatives
1300 Longworth House Office Building
Washington, DC 20515

The Honorable Saxby Chambliss
Ranking Member
Committee on Agriculture, Nutrition and Forestry
United States Senate
328A Senate Russell Office Building
Washington, DC 20510

The Honorable Bob Goodlatte
Ranking Member
Committee on Agriculture
U.S. House of Representatives
1300 Longworth House Office Building
Washington, DC 20515

Dear Mr. Chairmen and Ranking Members:

The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, continues to oppose the egregious and unnecessary expansion of the U.S. sugar program contained in the House and Senate version of H.R. 2419 (the Farm Bill), and urges Congress to institute a sensible and equitable sugar policy during the upcoming bicameral conference.

The existing sugar program already represents a chronically flawed policy that creates and maintains an artificial gap between U.S. and world sugar prices. And now, rather than seizing the opportunity to fix this policy, Congress is poised to pass a Farm Bill that makes it much worse.

For example, both versions of the proposed Farm Bill increase, rather than reduce, price supports. And worse, the bill continues sugar marketing allotments, ostensibly to balance supplies, while simultaneously guaranteeing U.S. sugar growers an 85% share of the domestic sugar market. No other commodity enjoys such blatant protection. To the extent that imports threaten the 85% share reserved for growers, U.S. taxpayers will be required to absorb the cost of removing surplus sugar from the market and diverting it into ethanol production. Since sugar is much more expensive than corn, and ethanol plants have no reason to pay more for sugar than they can pay for an equivalent amount of corn, the sugar would have to be sold to these plants at a deep discount to its purchase price. Such a policy is fiscally unsound, administratively difficult, and potentially subject to World Trade Organization (WTO) challenge.

The Farm Bill also restricts the administration of sugar tariff-rate quotas (TRQ) by requiring TRQs to be set at minimum quantities. The TRQ provision, coupled with the guaranteed mandate that U.S. domestic sugar producers must supply at least 85% of the sugar used in the U.S., acts as an impediment to trade and severely limits sugar imports to the United States.

Finally, the Chamber is also concerned about a Sense of the Senate provision stating that "the United States and Mexico should coordinate the operation of their respective sugar policies." The Chamber opposes any attempts to undermine our sugar trade obligations under the North American Free Trade Agreement as well as any efforts to manage sugar trade between the United States and Mexico.

It is very clear that the sugar program contained in the proposed Farm Bill distorts international trade and will trigger future WTO challenges. The United States has recently lost a number of dispute settlement cases at the WTO under which foreign governments have successfully challenged U.S. subsidy programs. Despite the fact that additional WTO cases are pending against the United States, the proposed Farm Bill does little to modernize our nation's agricultural polices to reduce our vulnerability to WTO challenge.

It is critical that protection of one sector of the U.S. economy not threaten the ability of other sectors to compete and succeed globally. Therefore, the Chamber urges Congress to take steps to modify the sugar program, and our nation's agriculture policies generally, for the benefit of citizens, the economy, and the U.S. international trading position.

Sincerely,

R. Bruce Josten

Cc: Members of the Senate Committee on Agriculture
Members of the House Committee on Agriculture