Sweet Deal: Sugar Subsidy Fight Has Paid Off for Hawaii Delegation

Published online: Aug 13, 2013
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WASHINGTON, D.C.-The fight in Congress over eliminating sugar subsidies has been good to members from Hawaii.

The delegation has raked in tens of thousands of dollars in the past couple years as the U.S. sugar industry spends millions to convince Congress that it needs help in order to compete with foreign producers.

This year, the industry has been especially sweet to Sen. Brian Schatz. Sugar interests are playing catch up to support Schatz, who did not run a federal election last year.

According to Schatz' federal campaign finance records, sugar-related political action committees have given Schatz $12,000 since the beginning of the election cycle.

That's more than anyone else in the delegation this year. But it comes on top of other large donations to Hawaii's delegation, including the $25,000 to Sen. Mazie Hirono and the $19,000 to Rep. Colleen Hanabusa in the 2012 election.

Ryan Weston, chairman of the Sugar Alliance, an industry group, said sugar companies are giving more to Schatz this year because they've already made contributions to the other members of the delegation.

On the surface, preserving policies to protect domestically produced sugar from foreign competition may seen like a no-brainer for Hawaii's delegation: help an industry that's part of Hawaii's history and culture.

After the Senate voted down an amendment to the farm bill in May that would have done away with the subsidy, Schatz said in a statement a repeal would be "devastating for the Hawaiian Commercial & Sugar Company and would have a large impact on the local Maui and broader state economies."

The sugar company-a subsidiary of Alexander & Baldwin-employs 800 people and pays $56 million annually in wages, he said.

But according to food manufacturers and government studies, subsidizing sugar is adding to grocery bills around the nation, as well as in a state that's already buckling under the high cost of food. And it might also be costing jobs.

In the U.S. the sugar subsidy comes in the form of a tariff on imported sugar. The federal government charges a low tariff on foreign sugar up to a certain amount. After that threshold is reached, the tariff balloons, essentially making it cost-prohibitive to import larger amounts of low-cost foreign sugar into the United States.

That does not affect the price of U.S.-produced sugar, which costs more to produce than it does in the rest of the world. Other nations, like Brazil, give direct subsidies to lower the cost of the sugar produced in those countries.

As a result, consumers are largely stuck with the higher-priced domestic sugar.

A General Accounting Office report in 2000 found the cost of U.S.-produced sugar was 10-cents-a-pound higher than the world average. The policy meant that U.S, consumers spent about $1.9 billion more than what they would have had to pay had more foreign sugar been available, the report estimated.

Studies commissioned by subsidy opponents say U.S. sugar prices have been between 64 percent to 92 percent more than the world average in the last four years, said Jennifer Cummings, a spokeswoman for the Coalition for Sugar Reform. The impact doesn't seem huge. Cummings said the higher sugar prices amount to about $40 a year for a family of four.

Still, a coalition of food manufacturers who use sugar-including candy companies like Nestle, Hershey and Mars, Kellogg, the American Beverage Association, and the U.S. Chambers of Commerce-is pushing for reform.

They've made gains in rousing opposition against the subsidies, especially in areas of the country that rely on candy manufacturing jobs. The Columbus Dispatch, for instance, reported that the Spangler Candy Co. of Bryan, Ohio-the makers of Dum Dums lollipops-moved 200 jobs to Juarez, Mexico, this year to take advantage of cheaper sugar.

And a 2006 Department of Commerce study said every sugar-producing job saved by the subsidy costs three jobs in industries that manufacture products that contain sugar.

But this is Hawaii, not Hershey, Pa., and the loyalty is with sugar, not chocolate.

As Hanabusa said on the House floor during the June vote on eliminating the subsidy, "I represent a state that was literally built on sugar. Why do you want to do away with something that doesn't cost us anything at this point in time, produces jobs, and is essential?"

It's unclear what, if any, impact the sugar subsidy is having on Hawaii companies that rely on sugar. University of Hawaii economists have not looked at the issue, and the Sugar Alliance could not point to Hawaii companies that have been hurt by the higher cost of sugar.

A spokeswoman for Alexander & Baldwin referred questions to the Sugar Alliance.

Sugar supporters argue it's unfair to assume lifting the subsidy would mean food manufacturers will shift savings to consumers.

"They aren't spending millions of dollars lobbying just to pass all those savings on to consumers," said Phillip Hayes, a spokesman for the Sugar Alliance.

The GAO report was inconclusive on the point, saying that whether consumers would see savings depended on the importance of price in selling products. Table sugar prices might come down, the report said, because there's not much difference between brands except price. Cheaper sugar might not cause the price to drop on other products like candy bars, the report said.

Ultimately, the sugar industry argues the subsidy is needed to protect U.S. companies from unfair foreign competition.

"It's the only chance we have against foreign sugar from places like Brazil and Mexico," Hayes said.

A Schatz spokesman said in an email, "the sugar we receive from foreign nations is HEAVILY subsidized. Brazil, which exports most of the sugar used around the world, almost completely funds its sugar industry. It's not a fair playing field for domestic producers ... The lower (foreign sugar) prices themselves are artificial."

Hirono made a similar argument in a statement. "Much is said about supporting `made in America' products, and (repealing the subsidy) does the opposite. It would have virtually zeroed out American sugar producers and forced us to depend on heavily subsidized foreign producers for this important commodity. Eliminating measures that level the playing field for American sugar producers would cost an estimated 142,000 jobs nationwide and devastate Hawaii's last remaining sugar producer."

Still, subsidy opponents appear to be making gains.

The House amendment to do away with the subsidy failed by a narrow 206 to 221 margin. The Hill noted that a similar amendment in 2007 failed by a 144-282 vote. The Senate amendment was defeated by only a 54-45 vote.

Both sides are spending big dollars in the fight. According to the Center for Responsive Politics, sugar industry lobbying has gone up from $7.5 million in 2008 to $7.9 million last year. The $5.2 million spent this year is on pace to surpass those amounts.

Sugar interests make up four of the five top lobbying spenders among crop production and processing groups. The American Sugar Alliance has already spent $1.75 million this year on lobbying. American Crystal Sugar has spent $1.03 million. The U.S Beet Sugar Associaton has spent $900,000 The Farjul Corp., the owner of Florida Crystals sugar, has spent $490,000, according to the center.

Alexander & Baldwin has also spent $80,000 lobbying for Hawaiian Commercial & Sugar.

Breaking down how much groups opposed to the subsidy has spent on the sugar issue is more difficult. Groups like the U.S. Chamber of Commerce lobby on a wide variety of issues unrelated to sugar, including bills to reduce childhood obesity and what kinds of foods are covered by food stamps. How much is spent lobbying about the sugar subsidy is unknown. Still, in total, groups that oppose the subsidy have ratcheted up their overall lobbying from $92.6 million in 2008 to $134.9 million in 2012.

Hershey, for instance, more than doubled its lobbying spending from $490,000 in 2008 to $1.2 million in 2012, according to federal lobbying reports examined by Civil Beat. In the first half of this year, it has spent $500,000, more than what it spent five years ago and on pace toward approaching last year's figures.

Nestle's lobbying efforts have grown from $1.9 million to $2.6 million, It has spent $1.05 million in the first half of this year.

In addition to lobbying, sugar interests are contributing heavily to candidates. The $447,000 in contributions made by the American Crystal Sugar Company this year makes up a third of all the contributions made for the 2014 elections by all crop production and processing companies.

Schatz has received $5,000 from American Crystal, which operates five sugar beet processing plants in Minnesota and South Dakota.

Schatz has also received $2,000 apiece from the Louisiana-based American Sugar Cane League of the USA and Michigan-based Great Lakes Sugar Beet Growers PAC, according to Federal Election Commission records. He has also received $1,000 apiece from the North Dakota-based Minn-Dak Farmers Cooperative PAC, the Southern Minnesota Beet Sugar Cooperative, and the Colorado-based Western Sugar Cooperative.

Most of Hirono's sugar money, about $15,000, has come from Alexander & Baldwin, which has a range of interests from sugar to shipping and real estate. Hirono also received $10,000 last year from American Crystal.

Rep. Colleen Hanabusa received $10,00 from Alexander & Baldwin, $5,000 from American Crystal, and $1,000 apiece from the American Sugar Cane League, the Minn-Dak Cooperative, Southern Minnesota Beet Sugar, and the Michigan Sugar Co.

Rep. Tulsi Gabbard, who also voted against removing the subsidy, has only received $1,000 from Alexander & Baldwin.

Aside from a $2,000 contribution Hirono received from the American Beverage Association this year, subsidy opponents have not given to Hawaii's delegation.

Source: sugarjournal.com