July 27, 2005 | Commentary on International Organizations

Beet-industry worry-warts need not fear DR-CAFTA

Can a trade agreement between the United States and six small countries in the Caribbean wreak havoc on Minnesota's sugar-beet industry?

Of course not. But one wouldn't know it to listen to the lamentations of the sugar lobby. Big Sugar warns that if the U.S. House of Representatives follows the Senate in approving the Dominican Republic-Central American Free Trade Agreement (DR-CAFTA), Minnesotans will find their sugar-beet fields barren and the thousands of workers who grow, pick, process and sell those beets unemployed.

But protecting sugar isn't about protecting jobs. Despite prices two to three times the world average, sugar farmers and processors have been eliminating jobs for years, thanks to mechanization. Meanwhile, those in the sweetener-using industries, who employ 10 times as many people as those who grow and produce sugar, are moving offshore to avoid those artificially high prices.

The fact is, Minnesota's agricultural landscape would hardly change under DR-CAFTA, the proposed agreement to expand trade between the United States and the Dominican Republic, Honduras, Nicaragua, El Salvador, Costa Rica and Guatemala. The agreement allows those countries to export only an additional 107,000 tons of sugar to the U.S. in the first year of the agreement.

That's about 1.2 percent of U.S. sugar consumption -- about 1½ teaspoons per American per week. Even 15 years from now, we would be bringing in just 1.7 percent of domestic demand. The United States International Trade Commission, American Farm Bureau Federation, the U.S. Trade Representative's office, and USDA Foreign Agricultural Service all have studied the agreement and concluded that DR-CAFTA won't affect the domestic sugar industry in any significant way.

DR-CAFTA won't have a major impact on the sugar-beet industry in Minnesota, either. According to the USDA's 2002 census of agriculture, only 1,369 of the more than 80,000 farms in Minnesota grow sugar beets, or about 1.7 percent. Sugar beets generate $336 million in the state, which sounds like a lot until one considers that Minnesota farms earn $8.6 billion per year. If DR-CAFTA is approved, the American Farm Bureau Federation predicts that just 9,000 of the 476,000 acres devoted to sugar beets may shift to other crops.

Weighed against the benefits of free trade, the choice is clear. The agreement may pry open the sugar market ever so slightly, but it does far more to open Central American markets to American goods than the other way around. Nearly all duties on products from the other six signatories were eliminated 20 years ago by the Caribbean Basin Initiative. What remains is for American farmers, manufacturers, retailers and other services providers to become more competitive, experience new market access, and benefit from stronger property-rights protection in the region.

That means more jobs for Americans and at better pay. That's the legacy of free trade, not the barren fields and long unemployment lines the sugar lobby predicts.

Daniella Markheim is a senior policy analyst in the Center for International Trade and Economics at the Heritage Foundation.

About the Author

Daniella Markheim Jay Van Andel Senior Analyst in Trade Policy
Center for Trade and Economics (CTE)

First appeared in the Minneapolis Star Tribune