Mr. Chairman, I come today to speak in favor of the sugar program and to oppose those who are bound and determined to tear this program apart. I find it incredible that this push continues now, after the vote last week on the Agriculture Appropriations Bill, and especially at a time when our family farmers across the country are in the depths of an economic crisis.
Who are these people who want to destroy this program? Well, they call themselves the Coalition for Sugar Reform. Who or what is the Coalition for Sugar Reform? Let me list a few of the members: The American Bakers Association, the National Confectioners Association - they make candy, the Biscuit and Cracker Manufacturers Association, the Chocolate Manufacturers Association and the Independent Bakers Association.
Let's look at this group, this Coalition for Sugar Reform. They want to gain access to an imaginary endless supply of cheap world market sugar in order to pass savings onto the American consumer. Anyone who truly believes this must also believe in fairy tales.
I will talk about the mythical world market sugar price, and this yearn to pass savings onto consumers later. But first of all, I want to know this. How did this group manage to convince the Senate Agriculture Committee to hold hearings on this one part of farm policy?
I find it quite interesting that this Coalition for Sugar Reform is able to move the Senate Agriculture Committee to hold a hearing such as this. This Coalition has been able to carve out time to make their case in front of this Committee in a matter of a couple months. This is amazing, considering how this Committee has turned a deaf hear to the pleas of family farmers who have repeatedly asked for hearings on the failure of Freedom to Farm.
There is something terribly wrong with this picture. It is almost perverse. Consider the facts:
The raw commodities the Coalition for Sugar Reform members use to make their products - grains, oilseeds, dairy and sugar - have, in every circumstance, plummeted in value. Which means that the family farmers who grow these crops - the people who get up in the morning, do all the work, do the chores, spend the day in the field, harvest the crops, and take all the risks - have in every circumstance seen a substantial decline in what they get for their produce. Wheat, corn and soybean prices are less than half what they were 4 years ago; milk prices a little more than half of what they were a year ago; sugar prices down by a third.
Yet, those who grow the raw product - the family farmers - they can't get the Senate Agriculture Committee to hold a hearing about this obvious failure of the underlying farm program. Their pleas fall on deaf ears. This Committee ought to be working to straighten out our failed farm policy rather than holding a hearing about ways to tear apart the sugar program.
But here we are, talking about sugar policy, and completely ignoring the failure of the underlying farm policy. I find this truly amazing.
As indicated, the topic is sugar - not Freedom to Farm. I believe I have made it perfectly clear how I feel about this, so let's move on. First of all, let's talk about that world market price of sugar this Coalition for Sugar Reform wants to tap.
I want to make this perfectly clear. There is not free trade in sugar around the world. It is not the case that the price that is described as the world price for sugar represents a free trade price. The truth of the matter is that 75 percent of the world's sugar production is bought and sold on contracts between countries. These contracts are highly profitable, allowing the remaining excess sugar production to be dumped well below the cost of production on what is commonly called the world sugar market. The current price of this excess or dumped sugar is around 8 cents a pound.
No one can raise sugar for 8 cents a pound. No one. The average cost of producing sugar world-wide is 18 cents a pound. And yet this Coalition for Sugar Reform would have us believe that this cheap sugar would always be there, saving American consumers millions of dollars.
So, common sense tells us that the world price for sugar is not the world price for sugar at all. It's a myth which is perpetuated by those who would destroy this sugar program.
The second point I want to make about this is this notion that any commodity price decline is passed onto consumers by food manufacturers. Let's look at the facts. The fact of the matter is, the price of sugar has dropped 32 percent since Freedom to Farm was passed, to a 22-year low. Let me emphasize this point; the price of raw sugar available to the members of the Coalition for Sugar Reform has dropped by a third. These food processors already have the ability to lower the price of candy, soda, cookies, cake, and other bakery products.
Have they done so? No. In fact, just the opposite has occurred. Buy a candy bar today, and you will be paying, on average, 6% more than you did in 1996. Buy some cookies or cake, and you will be charged 7% more. Ice Cream; buy some ice cream, and on average the prices are up 9%.
If the food processing members of the Coalition for Sugar Reform were so intent on passing savings onto consumers, why are the prices paid for these products going up? Like I said, sugar is down 32%. Why haven't they passed the savings along? Even a bag of raw sugar hasn't gone down, yet, the cost for the processor to purchase the raw sugar has gone down by a third.
This is inexcusable. Farmers are being fleeced, and so are consumers. The Senate Agriculture Committee ought to investigate this price gouging, before they look into dismantling the sugar program.
The Senate Agriculture Committee should also examine our trade agreements - for all of agriculture. But since this hearing is about the sugar program, let's look at the inexcusable sugar trade agreements our family farmers must contend with.
Our farmers were not well served by what happened in the Uruguay Round of the General Agreement on Tariffs and Trade, now known as the World Trade Organization. When the smoke cleared, sugar farmers in this country were shocked to find out that this agreement completely ignored the high price supports and massive export subsidies their competing counterpoints in the European Union were able to sustain.
The EU is the world's largest producer of sugar, and likewise is the largest exporter of subsidized sugar. And because the GAAT agreement allowed it, the EU support price for sugar is 40% higher than the loan level in the United States. This high subsidy fosters the overproduction - the amount of sugar not under contract - which floods the world with sugar and is the driving force behind the so-called world market price of sugar, or dump price, which I mentioned earlier.
Our producers of sugar are the most efficient in the world. The family farmers in North Dakota who produce beet sugar are second to none in efficiency. But, because of lopsided trade agreements against them, they compete on a playing field tilted against them. This Committee needs to understand that without the sugar program, the current trade agreements would allow our competitors to destroy our ability to produce sugar here in the United States. Is this what this country wants? I think not.
We only have to look at the past to see what happens when there is no U. S. sugar policy in place. Twice - once in the early 70's and another time in the early 80's - the sugar program was suspended. Prices went through the roof, and then fell through the basement. They ranged from more that 60 cents a pound in 1974 - to 40 cents a pound in 1980 - to less than 3 cents a pound in 1985. Consumers were gouged as the prices rose; farmers were hurt when the prices plummeted.
We should be able to learn from our mistakes. Gutting our sugar program would threaten the stable supply of sugar currently available to U. S. consumers. Consumers and family farmers alike need this policy kept in place.
We should also take a close look at the North American Free Trade Agreement. NAFTA has been a complete disaster for Agriculture, and particularly for sugar farmers. The ink was barely dry on the agreement when Mexico started pumping money into their sugar production. They pumped over $2 billion into producing sugar, transforming themselves from a net importer of sugar prior to adoption of NAFTA, to a net exporter of sugar.
In NAFTA, Mexico secured an agreement with the United States which allowed imports into this country of 25,000 metric tons a year. However, starting in FY2001, the cap expands the tariff quota to 250,000 tons a year.
We are currently in negotiations with Mexico over the NAFTA "side letter" on sugar, focusing on this expansion of the tariff quota and their use of massive subsidies to expand sugar production. The Senate Agriculture Committee should insist that Mexico's blatant move into subsidized sugar production after the adoption of NAFTA be addressed in these negotiations. If the U. S. does not forcefully deal with this issue, we risk sending a signal to our competitors around the world that we will allow foreign subsidized agriculture to completely destroy our farm infrastructure.
There is one final thing concerning trade that the Senate Agriculture Committee needs to investigate. There needs to be a full examination as to why molasses stuffed with sugar is still being allowed into this country. This practice is a blatant circumvention of our tariff quota. This molasses is being used for the sole purpose of smuggling excess sugar into the United States - its sole use is that of a pack mule.
The molasses in question is stuffed with South American sugar in Canada, and then transported into the United States. The sugar is then spun out of this concoction and sold illegally in this country while the molasses is sent right back across the border to be stuffed with more sugar - to start the smuggling cycle over again. This is an audacious circumvention of our trade laws.
In closing, let me say this. The sugar program has not worked as well in recent months and years as it has in the past. One reason, in my judgment, is because the current underlying farm program has failed. As prices have collapsed for most other commodities, and as we have pulled the rug out from under producers with a farm program called Freedom to Farm, we have had more acreage put into sugar production in this country.
And on the note of acreage increases, I also should remind this Committee that during the debate prior to the adoption of Freedom to Farm, the sugar growers lobbied hard to keep their marketing allotments. But this Congress did not listen to them, and the allotments were taken away.
The other reason for the sugar program problems is the atrocious trade agreements our family farmers are forced to contend with.
Some final points to consider:
We, in the United States, have the highest environmental and labor standards in the world, yet we still rank as one of the lowest cost producers of sugar, when cane and beet production is averaged.
The sugar industry has a $26 billion impact on the U. S. economy and supports 420,000 jobs in 42 states.
Sugar producers have not been a burden on the U. S. treasury. Producers were slapped with a market assessment tax of $5 per ton to help reduce the federal deficit from 1991 to 1999, adding about $279 million to this country's bottom line. Because of the current budget surplus, the market assessment has been suspended for FY2000 and FY2001.
In light of all of this, I respectfully ask that the Senate Agriculture Committee search for ways to improve our trade policy as it pertains to sugar imports, and also search for ways to strengthen the sugar program, rather than tear it down.
Senator Byron Dorgan