SUGAR'S SWEETEST DEAL

By John Greenwald

Agricultural socialism was supposed to end this week with the signing by President Clinton of the landmark Federal Agricultural Improvement and Reform Act (fair). Touted as the most ambitious effort to bring free enterprise to the farm in more than half a century, the overhaul slashes price supports for staples from wheat to cotton. No crop was to be spared the scythe of reform.

But for America's sugar growers, how sweet it still is. The industry's profit-enhancing price supports are mostly still standing. The program keeps the cost of domestic sugar at nearly twice the world level, and critics say it takes a $1.4 billion yearly bite out of U.S. consumers' pockets. "When it comes to sugar, there is just no reform," complains John Frydenlund, director of agricultural policy at the conservative Heritage Foundation. "It's a colossal disappointment."

The growers, both Southern cane farmers and Midwestern beet growers, outfoxed not only congressional reformers but also a high-powered coalition of sugar and sweetener users such as Coca-Cola and Hershey Foods. These opponents were joined by environmental groups, particularly those in Florida, where phosphorus-laden runoff from sugarcane fields has been turning stretches of the Everglades into cattail-clogged waters.

Yet the growers won the price-support battle in late February, when a bizarre coalition of half a dozen Republicans and Democrats changed their votes to defeat a measure by Florida Congressman Dan Miller, a Republican, and New York Democrat Charles Schumer to scuttle the program. Democrats were worried that killing the program would hurt their chances of winning back the House in the fall elections. Oddly, some Republicans also voiced election concerns; others were most concerned that their cherished farm bill could not pass without the price supports for sugar.

This strange debate found even Florida Republican Mark Foley, whose district includes the country's largest sugarcane grower, arguing for central planning. Says he: "While free markets sound good on the surface, we're quickly finding that the free market doesn't lead to the best end result." That merely ignores three centuries of economic theory and practice that holds exactly the opposite conclusion.

Representative Charlie Rose couldn't resist flavoring his arguments with some old-fashioned red scare tactics. Declaring that an end to supports would open the door to Cuban sugar, the North Carolina Democrat demanded to know, "How dare this House bring pleasure to Fidel Castro?" The Congressman will be happy to discover that the existing trade embargo against Cuba will deny any such solace.

The Senate also turned back a similar attempt to dismantle the program on a 61-to-35 vote in February, albeit after some more conventional politicking--a deft Bob Dole maneuver. The majority leader--cum--presidential candidate pushed through a measure that earmarked $200 million to help clean up the Everglades by purchasing adjacent cane fields and retiring them from production. That placated colleagues concerned about the impact of sugar farming and made it easier for them to perpetuate price supports.

The sugar growers, ranging in size from family plots to heavyweights like U.S. Sugar Corp., the largest grower in Florida, with revenues of $263 million, gave $2.5 million to Congress between January 1993 and June 1995, according to the Center for Responsive Politics. Their opponents gave just half a million less, but the sugar raisers had one advantage. "In the soft-drink industry, we don't have the luxury of having just one issue," says Drew Davis, a lobbyist for the National Soft Drink Association.

The sugar lobby argues that the industry is a vital source of jobs and is being unfairly criticized. The measure did, after all, decontrol the market-share allocations that existed between cane sugar (53%) and beet sugar (47%), increase the industry's taxes and eliminate some loan guarantees.

The sugar growers insist that the support program doesn't cost the taxpayers a cent. That's not quite right. The government restriction on imports decreases supplies, thus raising the domestic price of sugar to about 23' per lb. vs. about 13' per lb. on the world market. That's an indirect tax.

Robert Buker, senior vice president for U.S. Sugar Corp., argues that consumers wouldn't benefit from sugar prices set by the world market anyway. "The M & M company [Mars, Inc.], for example, would prefer to cut in half the 2 [cents] of sugar in each candy bar. You can bet they won't pass it along to the consumer, though."

Maybe, maybe not. That's not the point, economists argue: the market should determine the price of commodities and finished goods, not the government. That's the way it works for steel and autos, for microchips and computers. It ought to be good enough for candy bars too.

--Reported by Cathy Booth/Miami and John F. Dickerson/Washington

With reporting by CATHY BOOTH/MIAMI AND JOHN F. DICKERSON/WASHINGTON