ANALYSIS AND; COMPARISON OF
THE EXPERIENCES SURROUNDING
UNITED STATES SUGAR LEGISLATION,
1955 AND 1971

Thesis. for the Degree of ”M. S.
MICHIGAN STATE UNIVERSITY
IPAU-L JEREMY MILLER
L1 9 .7 2

 

 

 

ABSTRACT

ANALYSIS AND COMPARISON OF THE EXPERIENCES
SURROUNDING UNITED STATES SUGAR
LEGISLATION, 1965 AND 1971

BY

Paul Jeremy Miller

In 1971, Congress amended and extended the Sugar Act
of 1948 for three years. It was a quiet episode in the
legislative history of sugar. The experience surrounding
the previous extension, passed in 1965, was just the
opposite--chaotic and acrimonious.

The purpose of the study is to describe, compare,
and analyze the experiences surrounding the last two sugar
bills in the United States. If the two experiences--
including the major issues, political processes, and out-
comes--differed, or in fact were the same,what were the
reasons?

Sugar is a highly political commodity, and thus
emphasis is placed on the political processes affecting the
1965 and 1971 Sugar Acts. In so doing three questions are
asked: 1) Which political and economic forces were Opera-
tive? 2) Where were the conflicts, and why? and 3) Which

political forces were dominant?

Paul Jeremy Miller

In addition to a review of the 1iterature--primarily
Congressional hearings and other government publications--
the author had access to certain internal memoranda of the
Executive Branch. The author interviewed government and
industry representatives involved in the economics of sugar
and in sugar's legislative process in either 1965 or 1971,
or both.

Although the experiences surrounding the 1965 and
1971 Extensions were different, the two Extensions were very
similar in the direction which they led United States sugar
policy. That direction was toward a more effective cartel.
In general, the 1971 Extension represents a refinement of
the 1965 Act, and not a departure from it.

The 1965 and 1971 sugar legislation experiences,
including the major issues, differed because of four factors:
1) The economic conditions of sugar and the United States
sugar industry; 2) The political processes involved; 3)
Foreign policy considerations; and 4) The domestic political
environment.

The study suggests certain implications for public
policy and future research. They include: 1) Significant
reform in United States sugar policy is not likely in the
foreseeable future; 2) Institutional changes, such as a
strong consumer movement which would deal with relatively
minor legislation, such as sugar, and certain structural

reforms in Congress, are probably necessary to affect

Paul Jeremy Miller

substantive change in United States sugar policy; 3) By it-
self, public criticism aimed at the Sugar Act and its po-
1itica1 process will not lead to reform; 4) A two-pronged
research approach is necessary. The first should be what
America's sugar policy ought to be, based on a comprehensive
policiy evaluation approach which would look at the whole
program in a broad means-ends framework. Secondly, what
changes in the political process will be necessary to affect
such a policy, and how can those changes be brought about?

This second problem is clearly the more difficult of the

two.

ANALYSIS AND COMPARISON OF THE EXPERIENCES

SURROUNDING UNITED STATES SUGAR

LEGISLATION, 1965 AND 1971

BY

Paul Jeremy Miller

A THESIS

Submitted to
Michigan State University
in partial fulfillment of the requirements
for the degree of

MASTER OF SCIENCE

Department of Agricultural Economics

1972

ACKNOWLEDGMENTS

The author wishes to express deep and sincere thanks
to Professor James Bonnen for 1) the enjoyable sessions in
his office over the past two years; and 2) the inspiration,
advice, and encouragement he provided in the study, in
spite of the fact that he abandoned the author for six weeks,
by isolating himself in Italy.

The author also wishes to express his appreciation
to the Department of Agricultural Economics for providing a
stimulating academic and intellectual atmosphere over the
past two years.

Special appreciation and thanks are afforded Ray
Voelkel, who arranged the lion's share of the interviews in
Washington.

Special thanks to the Allens, for helping the author
maintain some degree of sanity over the last two years, and
for being such good people.

Finally, much thanks to Debbie-—not for her love and
spirit, the acknowledgment of which is, of course, out of
place in a scholarly work--but for her typing, which enabled
the author to finish the study and hence leave Lansing sooner

than would have been otherwise possible.

ii

TABLE OF

LIST OF TABLES . . . . . . . .

LIST OF FIGURES . . . . . . .

Chapter
I. INTRODUCTION . . . . .

Methodology . . . . .
Outline . . . . . . .

CONTENTS

Page

. . . . . . . . . . . . 2

O O O C I O O O I O O O 3

II. THE ECONOMICS OF SUGAR IN THE UNITED STATES

AND THE UNITED STATES

History . . . . . . .
Market Framework . .
The World Market . .

The United States Sugar Industry . . . . . .

Barriers to Entry . .

Eb

SUGAR INDUSTRY . . . .

NH
ONKOflb

III. THE UNITED STATES SUGAR ACT . . . . . . . . . . 22

Purposes of the United States Sugar Program . 23
Salient Features of the United States

Sugar Program . . .

O O O O O O O O O O O O 26

IV. SUGAR'S POLITICAL STRUCTURE . . . . . . . . . . 33

The Domestic Industry
The Administration .
The Congress . . . .
Foreign Lobbying . .

V. THE 1965 EXPERIENCE . .
The Economic Setting

Political Process (1):
Issues (1): . . . . .

o o o o o o o o o o o o 34
o o o o o o o o o o o o 37

o o o o o o o o o o o o 47
1963-64 . . . . . . . 50

o o o o o o o o o o o o 53

iii

Political Process (2): Pre-Hearings
Political Process (3): The House .
Issues (2): . . . . . . . . . . . .
Political Process (4): The Senate
Political Process (5): House-Senate
Conference . . . . . . . . . . .
Issues (3): A Summary . . . . . .

VI. THE 1971 EXPERIENCE . . . . . . . . .

The Economic Setting . . . . . . .
Issues (1): . . . . . . . . . . .
Political Process (1): Pre-Hearings
Political Process (2): The House .
Issues (2): . . . . . . . . . . . .
Political Process (3): The Senate
Political Process (4): House-Senate
Conference . . . . . . . . . . .
Issues (3): A Summary . . . . . .

VII. 1965 AND 1971: A SUMMARY AND COMPARISON .

Economic Conditions . . . . . . . .
Political Processes . . . . . . . .
Issues . . . . . . . . . . . . . .
Legislative Outcome . . . . . . . .

VIII. 1965 AND 1971: AN ANALYSIS . . . . .

Economic Conditions . . . . . . . .
Political Processes . . . . . . . .
Foreign Policy . . . . . .

Political Environment in the United

IX. POLICY AND RESEARCH IMPLICATIONS . .

SELECTED BIBLIOGRAPHY . . . . . . . . . . .

APPENDIX

iv

States

Page

57
62
66
67

70
71

74

74
76
81
88
93
95

98
98

101
101
102
105
107
112
112
115
121
122
124
128

134

Table

1.

LIST OF TABLES

Raw cane sugar prices--New York spot prices and
world prices adjusted to New York delivery
basis, monthly. 1957-1971. . . . . . . . . .

1971 domestic sugar production, by sectors . .

Foreign sugar quotas for 1972 . . . . . . . . .

Sugar lobbyists fees, 1965 and 1971 . . . . . .

Administration, house, senate, and conference
committee allocations of foreign sugar

quotas, 1965 . . . . . . . . . . . . . . . .

House, senate, and conference committee allo-
cation of foreign sugar quotas, 1971 . . . .

Sugar quotas for domestic areas: 1965, 1966,
1971, 1972 . . . . . . . . . . . . . . . . .

Foreign sugar quotas, deficits, and prorations:
1965, 1966, 1971, and 1972 . . . . . . . . .

Page

10
13

30

43

54

91

108

109

LIST OF FIGURES

Figure Page
1. Relationship implicit in the determination of

the consumption estimate by the Secretary
of Agriculture . . . . . . . . . . . . . . . . 27

vi

CHAPTER I

INTRODUCTION

In 1971, Congress amended and again extended the
Sugar Act of 1948, this time for three years. It was a
quiet episode in the legislative history of sugar. The
experience surrounding the previous extension, passed in
1965, was just the Opposite——chaotic and acrimonious.

The purpose of this study is to describe, compare,
and analyze, the experiences surrounding the last two sugar
bills in the United States. If the two experiences--
including the major issues, political processes, and out-
comes--differed, or in fact were the same, what were the
reasons?

Sugar has long been called "the most political of
all U.S. agricultural commodities."1 Its unique political
process attempts to mold divergent interests into a quiet,
effective cartel. For these reasons, emphasis will be
placed on the political processes affecting the 1965 and
1971 Sugar Act Extensions. In so doing, the following

questions will be asked about each experience:

 

1Interviews with James T. Bonnen, Donald Horton,
and others.

1. What political and economic fOrces were operative?-
2. Where were the COnflicts and why?
3. Which political and economic fOrces were dominant

in the outcome?

Methodology

 

An extensive review of the literature was first
conducted. This included Congressional hearings and reports
as well as other government and general literature. The
author had access to certain internal memoranda and papers
of the Executive Branch from the 1963-65 period. In ad-
dition, the author interviewed a number of those involved
in either or both the 1965 and 1971 sugar legislation ex-
periences, including: industry representatives; various
Executive Branch staff; U.S. Department of Agriculture per-
sonnel; and a staff member of the House Committee on
Agriculture.2 The interviewees were assured confidentiality
by the author in order to obtain information on the more
politically sensitive and personal parts of the process.
Whenever possible a specific source will be cited by name.
However, there are many instances in the study where con-
fidentiality cannot be breached; in these cases, the sources

can only be cited in general terms, such as "Interviews",

 

2See Appendix for a list of those interviewed.

or "Interviews with Industry Representatives". For the
same reasons, the majority of the memoranda can only be

cited in a general manner.

Outline

Chapter II focuses on the economics of sugar in the
United States, and includes a description of the United
States sugar industry. Chapter III offers a brief history
of the United States Sugar Act, plus a description of the
Act's salient features. Chapter IV explores sugar's unique
political structure.

Chapters V and VI are parallel case studies of the
1965 and 1971 sugar legislation experiences, respectively.
They include discussions of:

l. the economic developments

2. the politiCal process

3. the major issues

4. the key events

5. the legislative outcome in each experience.

Chapter VII summarizes the two preceding chapters
and presents a comparison of the 1965 and 1971 experiences,
focusing on the five points discussed in chapters V and VI.
Chapter VIII analyzes why the 1965 and 1971 experiences
were different. Chapter IX suggests the study's implica-

tions for public policy and further research.

CHAPTER II

THE ECONOMICS OF SUGAR IN THE UNITED STATES

AND THE UNITED STATES SUGAR INDUSTRY

The purpose of this study is not an economic analy-
sis of the United States sugar industry. But a brief general
description of the economics of that industry is offered, as
necessary background to understanding the Sugar Act and the

1965 and 1971 experiences surrounding sugar legislation.

History

Sugar has always been a deficit commodity in the
United States. Import duties on sugar date back to colonial
days when they were used by the British to raise revenues
for the French and Indian Wars.l Thirteen years after the
start of the Revolutionary War, the United States imposed a
tariff on the importation of sugar as a revenue-raising
device. With the Louisiana Purchase, the tariff became a
protective device for the Louisiana sugar industry. Pro-

tection has been afforded the domestic industry ever since.

 

lU.S. Department of Agriculture, Economic Research
Service, A History of Sugar Marketing, by Roy A. Ballinger,
Agricultural Economic Report 197 (Washington, D.C.: Govern-
ment Printing Office, 1971), p. 5.

 

The Spanish-American War, in transferring Cuba, the
Philippines, and Puerto Rico to United States control, re-
shaped the pattern of United States sugar production and
trade--a pattern whose effects are still present today.

The United States encouraged sugar production in
all three of these areas. As part of this encouragement,
Puerto Rican sugar was exempted from the tariff; Philippine
sugar was given tariff preference, and exempted from the
tariff in 1902. In addition, the Philippines was guaranteed
a minimum quota for its sugar in its 1934 Treaty of Inde-
pendence from the United States, and subsequent treaties.
Cuba was given a 20 per cent duty preference.

By 1915, imports from these areas had increased
265 per cent over the five-year period before the Spanish
American War. Sugar imports from Cuba increased 307 per
cent; Puerto Rico, 348 per cent; and the Philippines 81
per cent2, although part of this was due to an 81 per cent
increase in per capita consumption, and an 80 per cent in-
crease in population in the United States.3'

Until mid-1960 when, as an economic sanction, the
United States stopped importing Cuban sugar, Cuba was the
most important component in United States sugar supply and

trade. They supplied more sugar than any domestic sector

 

21bid., p. 16.

31bid., p. 17.

or other foreign country. There were three reasons for
this: 1) Cuba's geographical proximity enabled delivery
to New Orleans in two days; 2) Cuba's ability to produce
large quantities of sugar for export, most of which went to
the United States; and 3) Cuba's willingness to maintain
large inventories of sugar for United States export, causing
that country to become in fact the United States' "sugar
warehouse".

This last factor was the key to Cuba's importance
to the United States sugar economy since it absolved the
domestic industry--producers and processors--from assuming
the responsibility of maintaining more than minimal in-
ventories.

Incentives for Cuba were provided in the forms of
l) the tariff preference noted above; and 2) after 1934, the
United States paid a guaranteed price--usua11y a premium--
for all of the sugar it imported. In 1958, Cuba exported
3,437,582 short tons of raw sugar to the United States,
representing 37 per cent of United States consumption--73

per cent of imports other than from the Philippines.4

 

4U.S., Congress, Senate, Committee on Finance, Data
Relating to Sugar Act Amendments of 1965, 89th Cong., lst
sess., 1965, p. 10.

 

Market Framework

 

The demand for sugar in the United States is both
highly price and income inelastic. Estimates range from
-0.16 to -0.21 and 0.15 to 0.2, respectively.5 World supply
is also highly inelastic.6 In addition, the sugar crop is
highly susceptible to weather. These factors would theo—
retically suggest the presence of wide price gyrations; and
when sugar has been left to the free market, price insta-
bility has been a primary characteristic of that market.
Since 1934, United States policy has attempted to overcome
this price instability for its domestic industry by regula-
ting the amount of sugar marketed in the United States.
Given the high price inelasticity, if this government regu-
lation can be used to raise price as well as stabilize it,
total returns to producers will be increased. Most other
net importers of sugar also employ devices to protect their
industries from massive price instability.

Per capita sugar consumption in the United States has
been relatively stable for the past decade. In 1970, per

capita consumption was 103.58 pounds, refined value.7

 

5Thomas H. Bates and Andrew Schmitz. A Spatial
Equilibrium Analysis of the World Sugar Economy, Giannini
Foundation Monograph No. 23. TBerkeley, CalIfornia: Uni-
versity of California Agricultural Sciences, 1969), p. 16.

 

 

6Clayton Ogg, "Income Distribution Consequences of
United States Sugar Policy" (unpublished article, University
of Minnesota, Department of Agricultural and Applied Eco-
nomics), p. 4.

7Hawaiian Sugar Planters' Association, Sugar Manual
1971 (Honolulu, Hawaii: Hawaiian Sugar PlanterST’AssoEi-
ation, 1971), p. 27.

 

Given the high income inelasticity of demand for sugar,

total market growth is primarily a function of population
growth. The major change in sugar consumption since World
War II has been the form in which sugar is consumed. In
1971, only about 25 per cent of the sugar marketed in the
United States was sold directly to consumers.8 The re-
mainder was sold to industrial users, and consumed in
manufactured food and beverage products.9 Thus, today
three quarters of the sugar consumed in the United States
is purchased by the final consumer in a form other than
sugar. This further discounts the already low perceived
importance of sugar in consumers' budgets, and tends to
diminish consumer interest in sugar legislation.

Sugar is of significant economic importance in the
United States economy, particularly the economy of certain
regions; but its overall importance to the national economy
is not great enough to elicit strong general public interest.
Thus, a combination of strong vested interests--sugar pro-

ducers, processors, and industrial users--and general

 

8U.S., Congress, House, Committee on Agriculture,

Extension of the Sugar Act, Hearings, 92d Cong., lst sess.,
1971, p. 56.

91n 1949, sugar purchased by industrial users rep-
resented approximately 60 per cent of total United States
consumption. U.S., Congress, House, Committee on Agricul-
ture, The United States Sugar Program, 91st Cong. 2d sess.,
1971, p. 3.

 

 

public disinterest is created, which is a "major factor in

the political power of sugar in the United States".10

The World Market

 

Approximately 75 per cent of world sugar production

is consumed in the countries where it is produced.11 Some

13 per cent is covered by international agreement or re-

stricted trade, often at a price above that of the world

12 The world's free market in sugar is formed by

the remaining 12 per cent.13

market.

Because it is a residual market--producers clearly
prefer the premium offered in protected markets--many per-
sons, particularly those who support the United States sugar
program, claim that the world market is a dumping market;
that its price is irrelevant.14 Economists have argued,

however, that the 48 per cent of world trade represented by

the world sugar market is significant; that it is not a

 

10Interview with Roy Ballinger.

11The United States Sugar Program, p. 21.

 

12See Table l.

13The United States Sugar Program, p. 21.

 

l4U.S., Congress, Senate, Senator Long speaking in
favor of the Sugar Act, Senate Bill 2567, 89th Cong., lst
sess., October 19, 1965. Congressional Record, Vol. III,
Part 20, p. 27398.

 

 

10

 

I I mm.m nm.m mm.m mm.m vm.m mv.m mm.m wm.m vw.m mm.m Han
mo.m mm.s «H.m mH.m mH.m oH.m mm.m mH.m om.h om.n mm.n Ha.m onma
mh.h m>.h mm.> mm.b mn.h om.> v5.h mm.h om.n mn.n mm.h hm.h mmma
No.5 wm.n mm.h mm.h mm.n mm.> mm.h mm.h m¢.n mm.n mm.h He.w mmma
om.h mm.> hm.> «m.» mm.h om.> mm.n mm.b mm.n mH.> Hm.n ma.w nmma
va.n NH.~ mH.> HH.> mo.n oo.n mm.m om.o mm.o em.m mm.m mm.m mwma
mn.m om.m mm.m mm.m nh.m m>.m mh.m mn.w mm.m Hm.m mn.m mm.m mmma
mm.m nH.m hm.m om.o ma.m mm.m mv.m mo.m mv.w mm.> ~o.w mm.m voma
mn.m vm.m me.m mv.h mm.m mm.n on.m mo.HH mm.m vo.h om.m on.m moma
em.m ve.m mm.w mv.m em.o mm.m mv.m mv.m me.m mv.m hm.m me.m mmma
ov.m mm.m ma.m mo.m mo.m mm.m mw.m wv.m mm.m mm.m mm.m mm.o Hmma
mv.o mm.o mm.m mm.m hv.w mv.m mm.m mo.m na.m HH.m oo.w mm.m coma
5H.n vv.m mm.o Hm.m hm.m mm.m hm.o om.m mm.m vm.m mm.m ma.m mmma
ev.m mm.m n¢.m hm.m mm.m mm.m mm.m mm.m Hm.m mo.m mH.m mH.m mmma
ma.m ma.m Hm.m na.m ma.w mv.o mm.m hm.m ea.m ma.o oa.m mm.m hmma

_ecsom umm mucmo_ mmow 3mz eomm
.owo .>oz .uoo .ummm .ms¢ wash wash mm: .HQfi .Hmz .Qmm .cmn MOON
HhmHIbmmH

 

 

.MHSDCOE .mflmmn >HO>AHOU

xuow 3Oz OD Umwmsflpm mmoaum UHH03 paw mOOHum uomm MHOM SOZIImOOHHm Hamsm Osmo 3mm

.H OHQMB

ll

.Hema mumsqms .vmm

.oz 6:6 .mhma Suwanee .mmm

 

.oz .mom<I4oma .muuommm ummsm

 

 

paw “chma .Hm HOQEOOOQ .munuasoanmm so OOUDHEEOU Omsom .Emumaum Hamsm .m.D O39 "wousom

I I vm.m mo.m mv.m mm.m om.m Hm.m >>.m Hm.m mo.m mm.m Huma
Hm.m mm.m vH.m mo.m vo.m Ho.m mm.v om.¢ vs.¢ mm.v mm.v o~.v ouma
mm.m mo.¢ NH.¢ oa.v mH.v mh.v mm.v mb.v mn.v on.v mm.v mm.m mmma
m>.m hm.m mm.m mv.m wo.m mm.m m>.m mm.~ mm.~ Hm.m mH.m mH.m mmma
ma.m mm.m HH.m on.m wo.m mm.m mv.m mm.m mo.m hm.m hm.m Hm.m hmma
hm.m mv.m mm.m Hm.m mm.~ v>.m mm.m mo.m mo.m ma.m Hm.m mv.m mmma
mm.m nh.~ mm.m Hm.m mb.m om.~ ~m.m Hm.m vm.m hm.m mH.m mm.m mmma
mm.m mm.e mm.v mm.v mm.m Nh.m mm.m vo.m hm.m mm.m vo.oa hm.HH voma
om.HH hm.ma om.HH wm.m mm.h mm.m Nw.oa hN.HH wm.m Hm.h mm.m om.m mmma
mH.m vm.v na.v mo.v ~H.¢ om.m Hm.m mv.m hm.m wm.m nm.m m~.m mmma
mv.m m¢.m mm.m mm.m h>.m Ho.¢ mH.v mm.v mo.v mm.m hm.m mm.m Homa
mH.v mH.v mH.v mH.v mm.w om.v Hm.m oo.e Ho.w No.v mm.m Hm.m coma
em.m hm.m hm.m mm.m em.m wm.m nh.m mm.m mh.m mm.m hm.m ma.v mmma
mm.v Hm.v m~.v mm.v mm.¢ mm.w om.v mm.v Hm.v hm.v mm.¢ mm.v mmma
Nh.v mv.w mw.v Nv.m mo.m om.m mo.n mm.o we.» o~.n mm.m hm.m hmma

mHmfim Mmm>HAMQ

.84 c I ~Iw

MRI-h.

”HOOD.

ODINI

MMOM BmZ OB QWBmeQ< .mMHMBZDOU ZUHMMOM mmmBO OB BzmzmHmm mom m<UDm :QAfiOB:

r.,.-m
nwmehI

”UPI:

mmohI

AM» u I um

Whom.

CHIMW

OWIP

IAHNHIMw

VPID

[Ftflw

Nmoh.

CAU I NI.

09. RI

CEVIP

WPIP

AIVAUI NI

.mwmeh.

Cnlme

@wme

12

dumping market; and that its price is not totally invalid

for comparison with sugar prices in protected markets.15

The United States Sugar Industry

 

About 28,000 domestic farms produce sugar in the
United States, utilizing around $1.25 billion of invest-
ment.16 Approximately 150,000 farm workers, primarily on
a seasonal basis, are required to cultivate and harvest the
sugar crops.17

Sugar production in the United States was 5,929,462
short tons, raw value in 1971, (See table 2). Of this,
5,370,903 short tons, raw value (47.5 per cent of consump-
tion) was imported from thirty-one countries.18 1971 con-
sumption was 11,300,365 tons.19

Sugar is produced from two plants: sugar cane and

sugar beets. Beet sugar is refined in a single process,

 

5Interviews with Donald Horton and Roy Ballinger.
Also, see U.S., Congress, Senate, Senator Douglas speaking
against the Sugar Act, Senate Bill 2567, 89 Cong., lst sess.,
October 19, 1965. Congressional Record, Vol. III, Part 20,
p. 27401.

16

 

Book Value. The United States Sugar Program, p. 3.

l7Ibid.

 

180.8. Department of Agriculture, Agricultural Sta-
bilization and Conservation Service, Sugar Reports 236,
(Washington D.C.: Government Printing OffICe, January,
1972), P. 19.

19Ibid.

13

Table 2. 1971 domestic sugar production by sectors

 

 

 

 

% of U.S.
Short Tons, Raw Value Consumption
Beet Sugar 3,443,000 30.47
Mainland Cane 1,256,000 11.11
Hawaii 1,087,000 9.62
Puerto Rico 142,680 1.26
Total 5,929,462 52.47

 

Source: Sggar Reports, No. 236. ISDA-ASCS, January, 1972.
p. 19.

 

14

whereas cane refining involves two stages. The first process
in manufacturing sugar from cane is the extraction, boiling,
and processing of the cane juice. Raw sugar (about 98 per
cent pure) and various by-products are obtained from this
process. The raw sugar is then refined, yielding refined
sugar, refiners' sirups and refiners' blackstrap molasses.

Refined sugar from beets is processed in a single
operation, the principal by-products being beet molasses and
beet pulp. Much of the beet molasses is then put through the
Steffen's process for the extraction of additional sugar.20

The difference in beet and cane processing methods
has important effects on the sugar industry's organization
and political structure. In cane, the refining industry is
divorced from the producing and milling sector. There is
little research and technological interaction between the
two, and they are distinct political entities, as will be
discussed in Chapter IV. On the other hand the beet-producing
and processing sub-sectors work closely on research and farm
management problems, and growers buy their seed from process-
ing companies. Politically, they generally present a united
front.

The United States sugar industry is composed of five
sectors: 1) Mainland cane--Florida and Louisiana; 2) Hawaii;
3) Puerto Rico; 4) the cane refining industry; and 5) beet

sugar producers and processors.

 

20The United States Sugar Program, p. 4.

 

15

Mainland sugar cane production, 1,256,000 short tons
in 1971, represented 11.1 per cent of total United States
consumption in that year. (Table 2) In general, sugar cane
is not grown in rotation with other crops, but occupies the
same fields continuously. Except for the smaller growers,
most producers own and operate sugar mills which convert the
cane into raw sugar. Production in Louisiana has been fluc-
tuating for the past decade, while in Florida it has been
rapidly expanding. Production is much more concentrated in
Florida.

Louisian Experiment Station studies show that in
1969, large scale Louisiana sugar cane farms produced just
under 24,000 tons of cane per farm, at a per acre cost of

$274.08.21

Net income per acre was $9.32. For "family-
type" farms, costs per acre averaged around $240. On these
smaller farms, yields and net income per acre directly re-

lated to the number of acres harvested. Net income per

acre for the three size groupings of large scale farms

 

21Joe R. Campbell, Returns, Costs, and Profits for

Large Scale Sugar Cane Farms in Lou1siana, 1969*Crongear,
D. A. E. Research Report Number 4257(Baton Rouge, Louisiana:
Louisiana State University Agriculture Experiment Station,
May, 1971), p. 17. and Daniel L. Morris, Returns,
Costs, and Profits for Fam1ly3Type Sugar Cane Farms 1n
Louisiana, 1969 Crop Year, D. A. E. Research Report Number 424
(Baton Rouge, Louisiana: Louisiana State University
Agriculture Experiment Station, May, 1971), p. 13.

 

 

 

 

l6

ranged from $4.34 to $39.56. In 1970 there were almost
1600 Louisiana farms, a continual decline from the 1948 high
of nearly 6000, producing 604,000 tons, raw value, of sugar
on 265,700 harvested acres.22 That Same year, Florida's
135 farms produced 649,000 tons on 170,000 harvested acres.23
The sugar industry is Louisiana's fifth largest agricultural
industry, and Florida's third largest.

Hawaiian sugar production, 1,087,000 short tons in
1971, represented 9.6 per cent of total United States con-
sumption in that year. (Table 2) Sugar production in
Hawaii is incredibly concentrated and is characterized by
very high yields-~92 tons of cane per acre in 1970 versus
about 25 tons in Louisiana--and relatively high labor costs--

24

both field and mill workers are unionized. In 1971, mini-

mum wages for field workers was $2.41 per hour plus fringe

25 versus $1.50 in Louisiana, the lowest wage sugar

benefits
area.26 The twenty-one Hawaiian plantations each has a

mill. The Hawaiian sugar sector is heavily reliant on

 

 

 

22Sugar Repgrts 236, p. 26.

23Ibid.

24Hawaiian Sugar Planters' Association, Sugar Manual
1971, p. 9.

25

Ibid., p. 6.

26U.S., Congress, House, Committee on Agriculture,
Hearings, 1971, p. 165.

17

research. Its trade association invests about $2.5 million
annually in research.27 Sugar is Hawaii's largest agricul-
tural industry, and its third largest overall.

Puerto Rican sugar production was only 142,680 short
tons in 1971 (see Table 2). Puerto Rican production, in
good part as a result of industrialization on the island
and technological stagnation in the industry, has been de-
clining rapidly from a 1952 high of 1,372,000 tons.28

The cane-refining industry refines all imported
sugar--as well as sugar produced in the Mainland cane area.
The Sugar Act requires that imported sugar plus virtually
all sugar sent to the mainland from Hawaii and Puerto Rico
be raw. Refineries are located on the Gulf Coast--originally
for Cuba and Louisiana's sugar, much of Puerto Rico's crop
is now refined there; in Florida and Savannah, Georgia,
primarily for the Florida crop; in major Northeast Coast
cities, plus St. Louis and Chicago; and in Hawaii, where
sugar for local consumption is refined, and California. The
California refinery, which refines all of the Hawaiian sugar
shipped to the mainland, is owned by the twenty-one Hawaiian

sugar companies. Consequently, the Hawaiian industry not

 

27The United States Sugar Program, p. 4.

 

28U.S. Department of Agriculture, Economic Research
Service, The Structure of the United States Sweetner In-
dustr , by Roy A. Ballinger, AgricuItural Economic Report
213 (Washington, D.C.: Government Printing Office, 1971),
p. 6.

 

18

only has the most highly concentrated production but is the
most highly integrated of any of the domestic producing
sectors.

The refined sugar is generally marketed in the region
in which it is produced. However Louisiana is a surplus
area, and much of its refined sugar is shipped up the Mis-
sissippi River into the Midwest.

Beet sugar production, 3,443,000 short tons in 1971,
represented 30.5 per cent of the total United States con-
sumption in that year (see Table 2). Beets are generally
grown in rotation with other crops to maintain yields, thus
beet producers' economic activity is not as highly specialized
as cane producers'.29 Processors, who convert the beets to
refined sugar, are located in the producing areas; but be-
cause of the necessary diversification in farming noted above,
"processors own little farmland and grow few beets" for other
than experimental uses.30 As a result, the ownership inte—
gration of growing and processing--but not refining--which

characterizes the cane sector, is generally not present in

the beet sugar sector.

 

29The Structure of the United States Sweetner In-
dustry, p. 6. A North Dakota study Shows that in 1965*on1y
16 per cent of Red River Valley sugar beet farmers' crop-
land was planted in beets. The Red River Valley is a major
sugar beet area. See R. A. Yaggie and L. D. Loftsgard,
"Sugar Beet Production Costs and Practices in the Red River
Valley", North Dakota Agricultural Experiment Station Bul-
letin 466, (October, 19661, p. 6.

30The Structure of the United States Sweetner In-
dustry, p. 11.

 

 

 

 

19

The United States beet sugar producing sub-sector
is very unconcentrated compared to its sugar cane counter-
part. The 1970 output was produced on 1,367,000 harvested
acres on 16,442 farms.31

The beet sector has been more reliant on research
and technology than any of the other United States sugar
sectors, and the growth of the sugarbeet industry in the
United States is in good part a reflection of the success
of beet-related research.32 Technological improvements—-
such as the development of a monogerm seed, new weeding
practices, and mechanical harvesting--in the decade follow-
ing World War II helped significantly to boost United States
beet sugar production. By the late 1950's the sugar beet
harvest was virtually 100 per cent mechanized.33

The research and technology contribution to greater
sugar beet output has come primarily through increased yields

and lower per unit production costs.34

 

31Sugar Reports 237, p. 21.

 

32Interviews with James T. Bonnen and Robert H.
Shields. Also, R. H. Shields, "Sugarbeet Research and the
Sugar Act", American Society of Sugar Beet Technologists'
Journal, XII_TApri1, 1962), pp. 5-11. Both Bonnen and
SHIeIds note that the growth of United States beet sugar
production has been a function of new technology.

33United States Beet Sugar Association, The Beet Sugar
Stor (Washington, D.C.: United States Beet Sugar Associa-
tion, 1959), p. 21.

34Yaggie and Loftsgard, "Sugar Beet Production in the
Red River Valley", p. 8. The authors found that yields in
the Red River Valley increased from 11.6 tons per acre in

 

20

Beet sugar was produced in 24 states in 1971, the
largest producers being California, Idaho, Colorado, Michi—

35 Virtually all of the sugar from beets

gen, and Minnesota.
is marketed in regions close to the producing areas--the

Pacific Coast, the Mountain States, and the Midwest.

Barriers to Entry

 

Ballinger cites two significant barriers to entry in

36 First, there are large

the United States sugar industry.
capital requirements for manufacturing. There are definite
economies of scale in processing plants.37 Second, United

States sugar legislation restricts the annual amount of

sugar that can be marketed by each sector of the producing

 

1954-56 to 13.1 tons in 1960-63. They also infer that costs
have declined. For example, they found that scale econo-
mies begin to operate at farm sizes of 90 acres, primarily
because of mechanization. Since Red River Valley farms had
increased in average size from 70 acres in 1957 to 92 acres
in 1964, one can conclude that--because of scale economies--
per acre and per ton costs have declined.

35Sugar Reports 237, p. 21.

 

36The Structure of the United States Sweetner In-
dustry, p. 30.

37Interview with Robert Shields. Shields cited two
plant closings due to lack of scale and the large amount of
capital required to reach efficient size. He estimated that
efficiencies are not realized until a plant size of 4000 tons
per day is reached. The two plants that closed were half
this size.

21

industry. On the other hand, the Sugar Act has over time
enabled both the sugar beet and mainland sugar cane sectors
to improve their relative, as well as absolute, shares of
the total United States sugar market.

In presenting the purposes and salient features of
the Sugar Act, the next chapter describes both this im-

provement and the annual market ceiling noted above.

CHAPTER III

THE UNITED STATES SUGAR ACT

Sugar has been considered special in the United
States since colonial days, and for most of the country's
history as a republic, policy-makers have felt that a viable
continental sugar industry, to some extent protected from
the volatile world market, was in the "public interest". For
more than a century protection was in the form of a tariff.

The Depression severely affected the domestic sugar
industry; but it became clear that reliance on an increased
tariff would have more adverse effects than beneficial ones.1
There were two reasons for this: 1) High tariff protection
was already stimulating domestic overproduction, thus off-
setting the tariff's price protection. A further increase
in tariffs would have compounded the problem; and 2) Cuba's
economy, heavily reliant on sugar, was drastically damaged
as a result of increased sugar tariffs throughout the world.
Along with taking a large bite from per ton revenue, tariffs
caused the domestic overproduction in many countries, thus

cutting into markets for Cuban sugar.

 

1The United States Sugar Program, p. 32.

 

22

 

23

By 1933, representatives of the various sectors of
the industry met together, and with members of the Adminis-
tration (primarily the Department of Agriculture) and Congress
to formulate proposals for relief for the sugar industry.
Their plan was used as a starting point for Presidential
recommendations to Congress. These recommendations were the
basis for the Jones-Costigan Act of 1934, which created the
basic sugar program that exists today. Thus, industry-
Administration-Congressiona1 interaction, with the Executive
Branch taking an active role, and with Presidential interest,
was an important factor in formulating the legislation on

which the present United States Sugar Program is based.

Purposes of the United States Sugar Program

Sugar legislation is rife with language concerning
the essentiality of that commodity to national strategy and
defense. This belief is in addition to, and strengthens,
the economic and agricultural fundamentalist's arguments for
protection. Protection--from foreign competition and price
instability-~for the domestic industry is the main purpose
of the United States sugar program. A California study
shows that if the Sugar Act was abandoned in favor of free
trade, domestic production would decline by approximately

65 per cent.2 In addition to protecting the domestic industry

 

2Bates and Schmitz, A Spatial Equilibrium Analysis
. . . , p. 35.

24

at pre-Sugar Act levels, the Act has successfully increased
both the domestic beet sugar and mainland cane sectors'
relative shares of the United States market. In 1933, beet
sugar's share was 21.5 per cent; in 1971, over 30 per cent.
Mainland cane increased from five per cent to over eleven
per cent.3 ‘g
A corollary purpose of the Sugar Act is a stable
supply of sugar at fair and reasonable prices. This implies
a fair return to producers at reasonable prices to consumers
and industrial users. Table 1 compares United States and
world prices of sugar since the Act's inception. For most
years domestic producers and foreign suppliers of the United
States market have received a price greater than the world
market price. Thus, consumers have generally paid greater
than world price for their suggar;4 but they have been given
a steady supply of sugar at a relatively stable price--even

in years when world price exceeded United States price.5

 

3

4Bates and Schmitz, A Spatial Equilibrium Analysis
. . . , p. 32, The Authors estimate thatIIn 1970, trade
restr1ctions on sugar cost American consumers $500 million--
31 per cent of actual expenditures for that year. If trade
with Cuba is excluded, the savings from free trade would
have been $300 million—~25 per cent of 1970 actual expendi-
tures. Also, Ogg, "Income Distribution Consequences", p.
4. Ogg's estimates of the cost of the program to United
States consumers are even higher. If the United States
unilaterally shifted to free trade, he estimates the program
cost to consumers at $875,582,000 to $1,086,058,000 per
year depending on the world price of sugar.

5At least two of the interviewees indicated that this
was fine if it had been a conscious policy choice by de~
cision-makers, but that Congress, especially, has never

The United States Sugar Program, p. 5.

25

In diminishing uncertainty, assured stability of
of price and supply has encouraged both the industry--
producers and processors--and industrial users to plan and
invest. Producers know they will get a certain price--or
close to it--for their sugar; thus, they can plan accordingly.
Processors and industrial users, assured of a supply at a
relatively stable price, can invest accordingly; in addition
they have little need to maintain large inventories. Given
the very high price inelasticity of demand for sugar, pro-
cessors can pass on most of the increased price of sugar
resulting from the Act.6

Another purpose of the Sugar Act is fair wages for
sugar workers, and the exclusion of child workers.

The final purpose is to expand United States foreign
trade, especially in agricultural markets, and as an in-
strument of United States foreign policy. Thus, two of the
reasons access to the United States sugar market is granted
to foreign countries are: l) the belief that the increased
foreign exchange will, in part, be used to purchase other
United States agricultural products; and 2) to promote good
relations between the United States and the exporting

country. If the sugar producer is a less developed country,

 

asked the question: How much in increased sugar prices
is price and supply stability worth?

6Interviews with Roy Ballinger and Donald Horton.

26

as many are, the Sugar Act purports to aid these countries

in the development process. However, a recent study by Ogg
suggests that exporting countries, as a whole, might gain
significantly if the United States were to abandon its sugar
programs in favor of free trade.7 In addition, the relatively
fixed annual United States quota increases instability in
world markets, since it does not adjust to world supply or

demand.8

Salient Features of the United
States Sugar Prggram

 

 

The Sugar Act is best described as a manual of rules,
regulations, and procedures for "a domestic production and
marketing cartel managed by a staff agency of the Secretary

9 All of the features below date back to

of Agriculture."
the Jones-Costigan Act of 1934.
Each year the Secretary is required to determine the

United States' consumption requirements for that year. This

 

7Ogg, "Income Distribution Consequences", p. 3.
Whether there is a gain or loss, and the magnitude involved,
depends on the resulting world price of sugar. Ogg uses
estimates of 2.66 and 3.66 cents per pound. At the former,
exporting countries gain $138,506,000 per year from the
United States program, but at the latter price, they lose
$250,155,000 annually.

8Interview with Roy Ballinger.I

9Donald C. Horton, "United States Sugar Policies in
the Sixties and Possible Revisions of the United States
Sugar Program for the Seventies", (unpublished draft, 1970),
p. 2.

27

must be at a "fair and reasonable" price. The consumption
estimate, which can be amended during the year, becomes the
total size of the United States sugar market for that year.
The sole consideration now used by the Secretary in making
the estimate is the price guide.

The price guide for raw sugar was, until 1971, based
solely on a parity concept. Now it is a price which would
maintain the same ratio between it and the average of the
1) farm prices paid index (1967 = 100), and 2) the Wholesale
Price Index (1967 = 100), as the ratio that existed between
the two in the period September 1, 1970 through August 31,
1971.

Figure 1 shows the economic relationship which is

implicit in making the consumption estimate.

 

 

12, D
10-

8_.- - _.._._ _.

6__ I

I

4__ ID

2 ' '

(- J. l l I I A
0 4 8 10 11 12 16

Consumption Estimate
(Million Tons/year)

Figure 1. Relationship implicit in the determination
of the consumption estimate by the Secretary
of Agriculture.

It shows a hypothetical demand curve for sugar, (DD). If

the Secretary determined that the target price for sugar for

28

the year should be eight cents per pound, his consumption
estimate for the year would be 11 million tons. Thus each
year some point on the prevailing demand function must be
estimated in arriving at a consumption estimate.

A division of the total market between domestic and
foreign suppliers affords protection to the domestic in-
dustry. Foreign participation since the Act's inception
has ranged from a high of 54 per cent in 1944 to 33 per cent
in 1942. For non-war years, it ranged from 52 per cent in

10 Subordinate divisions

1958 to 39 per cent in 1964 and 1965.
of quota are also made among the producing sectors of the
domestic industry, and quota allocations are made among
foreign countries. If necessary,to limit output, acreage
allotments within each domestic area can be imposed by the
Secretary. The domestic quota allocations for 1972 are

as follows:

Short Tons, Raw Value

 

Beet Sugar 3,500,000
Mainland Cane 1,677,667
Hawaii 1,218,238
Puerto Rico 205,000
Total Domestic 6,600,905

This represents 55 per cent of the twelve million ton

 

10The United States Sugar Program, p. 27.

 

29

consumption estimate. Foreign quotas were assigned to
thirty-two countries, whose share ranged from 1,407,970 tons
for the Philippines (which exports only to the United
States) to 5,351 tons for Ireland. 70 per cent of imports
in 1972 will come from the "Big Five" countries: the
Philippines, Mexico, Brazil, Dominican Republic, and Peru
(See Table 3). If either a domestic area or a foreign
country is unable to fill its allocation or quota, the re-
sulting deficits are assigned to other foreign countries to
fill. Along with the size of the original allocation or
quota, and the share in market growth, which country or
countries that get to fill the deficits has always been an
important aspect of sugar's legislative process.

Foreign quotas can be suspended by Presidential
action. This occurred twice in the 1960's when Cuba (1960)
and Southern Rhodesia (1965) lost their quotas as part of
economic boycotts of those countries by the United States.

A tariff--of $.625 per 100 pounds--still exists on
imported sugar. At this level, given the usual premium
price in the United States market and the heavy demand by
foreign suppliers for quotas, the tariff is strictly a
revenue-raising device. A tax of $.005 per pound, raw
value, is levied on all sugar marketed within the quota

system.

Table 3. Foreign sugar quotas for 1972.

 

 

Country

Quotas, Deficits,

 

 

and Prorations

(short tons)

Philippines 1,407,970
Dominican Republic 703,677
Mexico 622,315
Brazil 606,921
Peru 434,300
West Indies 226,496
Ecuador 89,609
Argentina 84,111
Costa Rica 97,672
Colombia 74,766
Panama 46,729
Nicaragua 70,918
Venezuela 67,619
Guatemala 82,820
El Salvador 47,278
British Honduras 37,382
Haiti 34,085
Bahamas 29,687
Honduras 17,609
Bolivia 7,147
Paraguay 7,147
Australia 210,483
Republic of China 87,632
India 84,277
South Africa 59,539
Fiji Islands 46,121
Mauritius 31,027
Swaziland 31,027
Thailand 19,288
Uganda 15,513
Malagasy Republic 12,579
Ireland 5,351
Total foreign 5,399,095

 

Source: Sggar Reports 237, USDA-ASCS. February 1972, p.

 

9.

31

The final feature is conditional payments to growers
who provide fair wages and employ proper labor practices,

principally no hiring of child labor.11

The payment rate is
inversely related to tonnage (from .8 cents per pound on the
first 350 short tons to .3 cents per pound for production
above 30,000 tons). The budgetary cost of the payments is
covered by the tax. Through 1970, total taxes exceeded
total payments by some $630 million, since there are no
payments on foreign-produced sugar.12
The sugar program thus involves a tax, and provides
a price premium to both foreign and domestic producers, in
addition to an income supplement to domestic growers. For
these reasons it is unique among the basic commodity programs.
In attempting to combine a domestic agricultural
program with foreign policy into a single piece of legisla-
tion, the Sugar Act faces an inherent dilemma, since the
goals of the two often conflict. For example, should pref-
erence in foreign quotas be given to reliable suppliers or

to less developed countries, especially those in Latin

America?

11

11This requirement, in theory, made the sugar program
one of the most progressive of New Deal agricultural legis-
lation. These worker provisions, however, are now contained
in other laws; and it is argued that in practice, the Sugar
Act now requires no more of sugar producers, with respect to
workers, than is required by other legislation of producers
of all commodities.

12The United States Sugar Program, p. 27.

 

32

This dilemma penetrates deep into sugar's political

structure, the subject of Chapter IV.

CHAPTER IV

SUGAR'S POLITICAL STRUCTURE

Like the political structures in most other areas,

that of sugar tends to define the relevant issues in sugar
policy. Sugar's political structure and process can only be
described as unique among the basic commodity programs.
From the days of developing the original United States Sugar
Program, interaction among industry, the Administration, and
Congress has been an important characteristic of each Amend-
ment or Extension.

Political scientists distinguish between power and
influence. Some argue that power is inherent or sovereign,
anything less being influence. Robert Dahl, however, states
that "power is the capacity to change the probability of
outcomes."1 Similarly, Deutsch writes that "power is the
ability to make things happen that would not have happened
otherwise."2 Influence is seen as a milder and broader

form of power.

 

1Karl W. Deutsch, Politics and Government (Boston:
Houghton-Mifflin Co., 1970), p. 24.

2

 

Ibid.

3Ibid.

 

33

34

The Domestic Industry

In general, the sugar industry and its backers have
influence, which they use to define the relevant issues and
to mold favorable legislation. But, they also have politi-
cal pgwgr, in that they can block any legislation which is
unfavorable to the industry as a whole.4

Each sector of the domestic sugar industry has a
strong sector-wide organization or association--a major
reason for the positive legislative response to the needs
of the domestic industry.5 Each association is polit-
ically influential in its own right; and each has a Wash-
ington lobbyist with past Federal government experience.

As would be expected, each takes a stance on recommendations
for sugar legislation that is dictated by that sector's
economic interests.

The United States Beet Sugar Association derives
much of its political influence from the fact that sugar
beets are grown in twenty-four states. Although it repre-
sents processors, it almost always has grower support. In
many Congressional districts where they are grown, sugar
beets have a significant impact on the economy of those

districts. This geographical distribution of sugar beet

 

4Interviews with industry representatives and De-
partment of Agriculture staff.

5The Structure of the United States Sweetner In-
dustry, p. 31.

35

production is to some degree the consequence a conscious
political strategy. The industry has sought to expand into
new producing areas--even if they were not the most eco-
nomically advantageous ones, and conceivably at the expense
of areas already producing beets and desiring expansion--
to broaden its political base. Each new state of course,
has two Senators and at least one Congressman. But this
highly successful spread—-halted temporarily by the 1965
Extension--has probably reached its practical limit, es-
pecially since some of the newer areas, particularly in
New York and Maine, have experienced production and pro-
cessing problems.

The primary sugar beet lobbyist for the past twenty-
five years has been Robert Shields, Executive Director of
the United States Sugar Beet Association. Shields was an
Agriculture Department lawyer when the first Sugar Act was
written, and General Counsel of the Department for much of
the 1940's. Shields is considered among the best lobbyists
in Washington.6

Mainland sugar cane is represented by the American
Sugar Cane League and the Florida Sugar Cane League. Their

political influence has primarily been-~at least until

 

6This judgement was made several times in interviews
with certain industry representatives and Government staff.
Also, an internal Executive Branch memorandum passed the
same judgement.

36

1969-~a function of the Congressional Seniority System.
Either or both Louisiana and Florida have had men in powerful
positions, eSpecially in the Senate, since the Act's incep-
tion. Unlike the beet sector, the mainland cane area, until
recently, has not vigorously pursued quota increases, other
than from consumption growth. The Leagues' present lobbyist
is Horace Godfrey, (hired in 1969), former Director of the
Agricultural Stabilization and Conservation Service (1961-
69)--a political appointment--with strong political ties both
in the Agriculture Department and on Capitol Hill.

The Hawaiian Sugar Planters Association has Hawaii's
two Congressmen and Senators solidly behind it since sugar
is such an important part of that state's economy. The
Association's lobbyist is a former General Counsel of the
Department of Agriculture, during the Kennedy and Johnson
Administrations, John Bagwell.

The United States Cane Refiners' Association derives
part of its political influence from the metropolitan Con-
gressmen in whose districts refineries are located. They
also have strong backing from Congressmen with labor ties.
But the significant part of the Refiners' political influence
comes from their careful cultivation of, and close ties with,
the Democratic and Republican leadership in Congress, par--

ticularly in the House of Representatives.7

 

7Interviews with industry representatives.

37

In part this success can be attributed to the Association's
Washington lobbyist, Irving Hoff, a l4-year veteran of Capitol
Hill where he was a key Senate aide.

The Refiners' usual stance on sugar legislation is
a dual one. First, they take a free-trade position in sup-
porting increases in the size of the foreign share of the
United States sugar market. But this is coupled with their
second stance, a protectionist one, i.e., their successful
efforts to require that virtually all imported sugar be raw.

As one extension of the Sugar Act nears expiration,
representatives of the industry associations meet to formu-
late proposals for the next extension by developing areas of
mutual agreement and trying to overcome intersectoral con-
flicts. If successful, a united front is presented to
Congress and the Administration. This single industry pro-
posal is generally backed by a pooling of the various
associations' political influence-~thus creating genuine
political power for the industry. Congress and the Admin-
istration are generally receptive to the industry's proposal

under these conditions.

The Administration

Administration involvement in sugar's political
process takes place at many levels, including the Presiden-
tial one. At least five of the six Presidents who have
served during the Sugar Act have had direct involvement in

the Sugar Program or its political process.

38

The agricultural/foreign policy dilemma of sugar
legislation is readily seen in the different positions taken
by the Departments of Agriculture and State. Each has its
own clientele, whose views their respective positions re-
flect. The domestic industry with Agriculture; and foreign
suppliers, plus usually the Refiners since they refine all
imported sugar, with State. The two Executive Office
agencies which are often active in sugar policy also extend
their traditional policy interests into the sugar area. The
Bureau of the Budget (now Office of Management and Budget)
generally concerns itself with the fiscal aspects of pro-
grams--budgetary costs, Treasury outlays, tariffs and taxes
involved, and how these fit into the Bureau's View of national
budget priorities. Under Kermit Gordon in 1965, they took
a stand advocating reform in the sugar program. The Council
of Economic Advisors tends to base its positions on its
perceptions of national economic welfare and thus its posi-
tion on sugar policy is generally one of advocating a less-
protectionist, more consumer-oriented program. Because of
these positions, the Council's and Budget Bureau's influence,
while at times strong, historically tends to be relatively
minor in sugar policy. This was particularly true of the
Council in 1971, when its position tended to isolate it from

any meaningful input into sugar policy that year.8 The

 

8Interview with Gary Seevers.

39

Council and Budget Bureau will have some impact at the inter-
agency staff level--another unique feature of sugar's polit-
ical process, where representatives from the concerned
agencies and Departments in recent years have formulated
joint prOposals--but these recommendations are often omitted
or reshaped when sugar policy is reviewed at more political
levels of the Administration. Political tradeoffs tend to
dominate sugar's policy decision process.9 This was best
exemplified in the political bargaining of sugar legislation

and general farm legislation in 1965, which will be discussed
in Chapter V.

Intra-Administration conflicts are generally re-
solved, sometimes by the White House, so that the Adminis-

tration usually presents a fairly solid front to Congress.

The Congress

 

Because the Sugar Act contains a tax, it must
originate in the House; but unlike other tax bills it is not
sent to the Committee on Ways and Means. Instead, sugar
legislation is formulated in the Committee on Agriculture
where virtually all other agricultural legislation origi-
nates. This is based on precedent: the original Sugar Act
(the Jones-Costigan Act of 1934) was an amendment to the
Agricultural Adjustment Act of 1934, which originated in the

Committee on Agriculture.

 

9Interviews with James T. Bonnen, Horace Godfrey,
and Donald Horton.

40

Sugar legislation invariably comes to the House
floor on a closed rule--on1y Amendments agreed to by the
Chairman of the Committee on Agriculture are recognized.
This, combined with the industry's political power, usually
assures passage intact of the Agriculture Committee bill.

In the Senate, sugar legislation is handled by the
Finance Committee, which generally hears tax bills, but whose
involvement with agricultural legislation is highly limited.
That Committee has always had a few Senators on it sympa-
thetic to the needs of the domestic industry. Its present
Chairman is Russell Long of Louisiana. In addition, Senator
Allen Ellender of Louisiana, a Senator since 1937, though
not a Finance Committee member, is always consulted on sugar
legislation.lo

Differences in the House and Senate versions are
worked out in Conference Committee, and in general the House
bill usually prevails. The primary reason for this appears
to be that House conferees (who are from the Agriculture
Committee) have more interest and expertise in agricultural
legislation than their Senate counterparts (from the Finance
Committee).11 House members generally serve on only one

Committee--thus Agriculture Committee members can devote

 

10Interview with Robert Shields. In 1956, Ellender
represented the domestic industry in presenting its proposals
to the Senate Finance Committee.

11Interview with Hyde Murray.

41

large amounts of their time to that committee's business—-
while Senators usually are assigned to two or three commit—
tees.

This last fact further increases the domestic in-
dustry's political leverage. Sugar legislation generally
is viewed as relatively insignificant by many Finance Com-
mittee members, and thus they are inclined to go along with
the Chairman and ranking minority member. Currently these
are Russell Long and Wallace Bennett of Utah-—a major beet
sugar state--respectively.

In addition to the usual legislative process of
hearings and Committee meetings, leaders from both the House
Committee on Agriculture and the Senate Finance Committee
meet with representatives of the domestic industry to help
the latter develop proposals for a new Extension of the
Sugar Act, and to offer political advice on industry

. 12
recommendat1ons.

Foreign Lobbying

 

Congressional Committees generally refuse to hear
testimony from official representatives of foreign govern-
ments. Instead of using normal diplomatic channels (Em-

bassy-State Department) virtually all countries interested

 

12Interviews with Robert Shields, Irving Hoff,
Horace Godfrey, John Bagwell, and Hyde Murray.

42

in participating in the United States sugar market-—either
in obtaining a new quota, or maintaining or increasing an
existing one--hire domestic lawyers to present their cases
to Congress. This practice became prevalent after Cuba's
quota was suspended, and it became necessary to reallocate
that share of the market. Although the practice is not
unique, it is highly unusual. It is also one of the murkier
aspects of sugar's political process. Lobbyists have in-
cluded former Agriculture Committee members (one, Harold
Cooley, a past Chairman), a former Senator, a former Cabinet
officer, and a handful of lawyers who had served in the Ag-
riculture Department. Most have close contact with at least
some Committee members. Charges of improprieties between
Committee members and lobbyists were often made during the
1960's. None was proven, however, but critics contend that
the problem is as much the impression conveyed to foreign
governments or their sugar industries by the lobbyists that
the Congress is "for sale", as the improprieties themselves.l3
Table 4 shows the fees the lobbyists received in 1965 and
1971.

Never was the foreign lobbying aspect as much in the

forefront as in 1965, when it brought sugar's political

 

13U.S., Congress, Senate, Senator Fulbright speaking
against the Sugar Act, Senate Bill 2567, 89th Cong., lst
sess., October 20, 1965. Congressional Record, Vol. III,
Part 20, p. 27524.

 

43

.xoma.maw
Owuhomwh UOHHOQ .08

w umma CHV .Hn me comm
.Hh HOQ oooewmw

.um ewe ooo.oem
.e» Mme ooo.omew

.es ewe ooo.oew
Umumfia uGSOEO oz

.mOOH>HOm Mom madam
.Hm Hem
ooo.mew ..oe ewe ooo.em

Amy
oo.ooo.m
oo.oom.m
oo.ooo.m
oo.oom.h
oo.oom.NH
oo.mmm.MH
oo.ooo.ma
oo.ooo.ma
oo.ooo.ma
NH.m>H.mH
mo.omm.ma
oo.ooo.om
oo.ooo.v~
oo.oom«v~

oo.ooo.mm
mo.HHm.Hm

oo.ooo.om.
oo.ooo.omm

mensoeoo
moanmfid Hmnucmu

mausocom smauflum
Hwnmnm

ww>flaom

mmamnmm
OHHmuums¢

mafiucmmum

Han

COANMHoomm< Madam ocmaflum3m

mcwnu mo oaansmmm

ocmawmne

mammoocm cnmzusom

OHHnsmOm umommmmpmz

Osqflcfluumz w manamomso

msflufiusmz

OHQEOHOO

summ

mweHEEHHeee

mwamuums¢

OOHHmd nusom

OHUsH

eflem
OOHm mumou .OHOEOUODO
.msmeOOHz .HOUO>Hmm Hm .mmnso

Icom .Hflocsoo Hamsm GMOHuwfid :flumq
mmuspsom nmfluwnm cam mfimcmm

.Howwsom .mOHUcH umOB nmfluflum

kumum

Coaxmz

OHODNOGO>

mmma

chosm EOE
.uw .mwmom .m mmEona
. sawso
OOA HDSDH¢ .ccwso..q Hanuufi
HHEOZ..m unmade
sflaxcmum Oxmam
neenmsmq .o emsm
cumcumm .0 unmnom
MHHMHO onocmnwad
..uh .OONOb .m EOHHHHB

:Omumq..o unmnom
:oumcfluumm..q pumnom
ucmuw mmuomm wmcuogufi
Hamousm GOmcmw mmcuouwfl
swampsw .m unoE>Om
mmnuom msflaumum Hmuamz
ummcumm .2 mmamb

cflammq .0 anon a swflnom ummcnm
363m .m paoaud
Hawcsoo.o .4 snow
pumsumm .O pumnom
ammonmz .m anon

somBMQ gammauw

c3oum .m mmaumno

cmammm .N cooamnm

GGHDO .A Hsnuud
uHeOz..m pumnaa
smemmnu .q Hmomo
xnmq xOHHumm mmaumso

 

Anew» ummv me

Uwucmmwummm muucoou

unwmd

 

 

.Hhma.@cm mmma muwuflumflmnnoa Hamsm .e magma

44

mean .mHH .Oz .hHH
HOsOemmOemcoo .mmme

.Oechm .mmOechO ..m.D

.oemmem .e .eeme .em

.eo> ..wwww ewe ..eeoo wee mew lmeeem .e .om eewe .eee .eo> .weowwm
.me eweoeoo ..wwww ewe ..eeoo seem

"OOHDOW;

 

.ee ewe ooo.mmm
.ee ewe ooo.ome
.ee ewe ooo.eee
.e» ewe ooo.o~e
.ee ewe ooo.ome
A.e>
umwm eOM memeOOOe mnm.mvw
OOueomOev .en eOm mmuomm
.OE eOm oowm
ooo.mm
mO3 mason OOueomOe ummq
.mOoe>eOm mo :Oeuecmo
IOOe :e mOmscon Ocseoqe
eon mOOUV .oE eOm omh.mw

.ee ewe ooo.mee

.OE eOm comm

.ee ewe ooo.mee
.OE eOm ooo.¢m
.ee ewe ooo.m~e
.ee ewe ooo.mee
.ee ewe ooo.m~e
.OE eOm

ooo.em wsee wwe ooo.oew
mOchmxm eom meaem

.ee ewe ooo.m~m
memo mOmsOmxm
.OE eOm ooo.~m

.ee ewe oom.~ee
.ee ewe ooo.mee

.em eOm ooo.mmm
.OE eOQ ooo.m m
.em ewe 999»Mee

Itukfi Ihcnm Goesaeéfld
IIeKn H0: OCC I CIA u...

mOeUcH umOz
OHOzNOQO>
eczema
Osmaemna
pcmaeumsm

wweeee Epsom
weeeo eo oeeesewm

mOcemmHHenm
seOm

hwsmmewm

madame
ooesz

mseueesmz.

Hzmdmz
Aemommmmvmzv DeansmOm mmmmmamz

meeOneq

OGOHOeH

wepce

euemm

emee

OsvecHuemz .OmsoHOpmsw
pamamcm

eovmsom
OflHQSQOm GOOHGHEOQ

a 6’4/4. 5190)) .
I ,l.I-pnl\ - (a I clan.-. -

mu.- E...IH1u mUCfiUm— rpm fl .8 at L «a
e. .4. NT... Ie .2

scene
OOA ensued easeso .q esaee<
cmmeeewz .q .Om
UHOM£O3OA .m mOOeUcm
>OHOOU .o UHOeOm
meanwnu .2 Ooeemsh

MOCOSOZ anon
sonHOGOm .U OmeOOw

HHOqcoo.o .« econ
maezm a eOEemm .Oeueeaooo
.eOmOOm .meDQaO>OA .eOnqum

eweewe .N coeewem

, caeso
OOq ennue¢ .aceso .A esneefl
Oxesom.o meccOo
GOOeOem eOe>Oo .3
Ommeea eOeHHOO meeOb
mOeesm .m eOuHmz

MOHOOU .Q waoemm
Ncoem .3 OmeOOO
mHOecmn .m HOOSOHZ
Seem .e eeeeee
:3oem .m mOHemnu
mmeesm .m eOeHmz
amneasom a OHOHGOQ
eceso
OOq ensued .GcHDO .q ennue<
OGOflHDb .z mOEOb

I lifllnn

F
fifth Laaankn/N s CCrflflmIv I.” “jeand MIA/N
I...

45

process and the Sugar Act itself into the limelight, making
the Act a significant political issue for the first time

since its origin. Chapter V describes the 1965 sugar legis-

lation experience.

CHAPTER V
THE 1965 EXPERIENCE

1965 represented the kind of experience which cartels
prefer to avoid: bitter internal dissension; economic prob-
lems, and public concern over both the cartel's political
process and the Sugar Act itself.

Before describing that experience, two features of
the 1962 extension of the Sugar Act must be noted. Many
Administration officials felt that the end of the United
States' reliance on Cuba afforded an opportunity to reshape
United States sugar policy;l hence the development of two
new features. The first is the global quota. Instead of
reassigning the Cuban quota in its entirety to specific
countries, the 1962 Act held most of Cuba's quota (about 1.5
million tons--57.77 per cent of imported sugar other than
from the Philippines) in reserve until the President saw fit
to restore it. The Cuban reserve was to be allocated as a
global quota, on a first-come, first-served basis. The
second feature is the import recapture fee, a device to

capture all or part of the price premium on imported sugar.

 

lHorton, "United States Sugar Policies", p. 11.

46

47

The episode that we have called the 1965 experience
actually began in 1963 with some unusual developments in the

economics of sugar.

The Economic Setting

 

In 1963 and the first quarter of 1964, the world
price of sugar skyrocketed above the United States price for
the first time since 1957 (See Table 1). At its peak the
difference was over three cents per pound. There were three
reasons for this phenomenon: l) Decreased production in
Cuba; 2) A poor Eastern European sugar beet crop for two
continuous years; and 3) A relatively rapid increase in
world demand for sugar.

In reaction to this, the State Department sent ur-
gent messages to all non-Communist sugar producing countries
asking for supplies above their quotas--i.e. to fill the
global quota--at the lower United States price. State im-
plied that 1963-64 performance would be the basis for new
foreign quota determination by Congress when the Sugar Act's
extension expired at the end of 1964.2 Thus, countries were
asked to take short term losses in favor of long term gains.

As a result, the total foreign quota for both 1963 and 1964

was filled.

 

2At least two of those interviewed claimed that the
State Department had more than implied that increased quotas
would result for countries which "came through" in 1963—64.
They claim that actual commitments of increased quotas were
made.

48

Some Congressmen, particularly House Committee on
Agriculture Chairman Harold Cooley, were incensed at this
action by the State Department since they Viewed the allo-
cation of foreign sugar quotas as strictly a Congressional
perogative. Cooley and others also blamed the economic
situation on the global quota and recapture fee, and vowed
to oppose their inclusion in the next extension of the Sugar
Act.

In 1961, domestic production controls had been re—
moved following the suspension of Cuba as a source of sugar
supply for the United States. With the advent of world
shortages in 1963, the Department of Agriculture also urged
domestic producers to increase their production. It is
claimed by some that as a quid pro quo the Agriculture De-
partment made commitments of increased quotas for the domes-
tic sugar industry when Congress next considered sugar
legislation.3 The response, especially in the beet areas,
was quick and large, although a question persists as to how
much of this was in response to the invitation and how much
was due to better production and market conditions. Sugar

beet production in 1962 was almost 380,000 tons short of its

 

3Interview with James T. Bonnen. Robert Shields im—
plies this in a 1964 speech. Robert H. Shields, "Consumer
Interests--The Basic Issue in Sugar Legislation" (speech
given at the Annual Convention of National Vendors Associa—
tion, Miami Beach, Florida, April 18, 1964), pp. 2-3.

49

quota.4 In 1963, beet production increased 500,000 tons,
while marketings increased 20 per cent over 1962 levels.5

By mid-1964, when successfully expanded world pro—
diction hit the world market, the world price of sugar had
returned below the United States price. By the end of that
year, it had nosedived to less than three cents per pound;
and domestic producers--especially beet producers--had sub-
stantially more inventories on hand than they could legally
market under their Sugar Act allocation.

Although the basic statute of the Sugar Act ran
through 1966, the foreign quota allocations were to expire
at the end of 1964. Given the surplus inventory and over-
production problems of domestic producers, it was clear that
they too were in need of legislative help in 1964. It was
also evident that the Act was deficient in its ability to
deal with world shortages. One method suggested by some in
the Administration was larger inventories by the domestic
industry.6 This proposal was met with vehement industry
opposition.

Beet producers and processors were seeking a 750,000

ton per year increase in their allocation, in order to market

 

4United States Cane Sugar Refiners' Association,

Setting the Recgrd Straight Concerning Sugar Legislation
(washington, D.C.: U.S. Cane RefinersT Association, August,
1964) , p. 1-2.

5

 

Shields, "Consumer Interests", pp. 2-3

6Internal Executive Branch staff memoranda.

50

their inventories and not decrease production. Since con-
sumption growth would cover only a small share of this, any
increase even approaching this figure would have to come
from another sector's allocation. Politically, the prime
candidate would be foreign quotas. But there was a major
drawback here: Since the cane refiners process all imported
sugar, and no beet sugar, any cut in the foreign allotment
would directly affect them--particularly in the Northeast,
where refineries process imported sugar exclusively. The
result was a bitter and deep conflict between the industry's

beet and refining sectors.

Political Process (1): 1963-64

The Administration was determined to take an active
role in sugar legislation, partly because Budget Bureau Di-
rector Kermit Gordon strongly felt that the Sugar Program
was in need of reform.7 But the extent of the Administra-
tion's role was seen by one participant..as primarily a
function of the strong and deadlocked conflict within the
domestic industry.8 Since the traditional processes of
sugar legislation formulation were not functioning, the

Administration felt itself forced to take the initiative.

 

7Interviews with James Bonnen and Donald Horton.

8Interviews with James Bonnen.

51

By early 1964 the Administration had formed an inter-
agency political level group to make recommendations on
sugar policy. They in turn formed a staff level technical
task force, whose recommendations were to be free of politi—
cal considerations.9 The technical committee was to report
to the political level group, who would finalize Administra-
tion proposals for the President.

The conflict between the cane refining and beet sec-
'tors was so strong, in spite of attempted intervention by
the Administration and members of Congress, that the two
groups would still not meet, and representatives of each sec-
tor were charging the other with trying to destroy the United
States sugar industry.10

This conflict was also mirrored in the Administra-
tion, where the Agriculture and State Departments were at
odds, primarily over the allocation of quota between foreign
and domestic producers. As noted above, both had made com-
mitments in 1963 and early 1964, and it was now time for
their respective clientele to collect. Thus the Department
of Agriculture vigorously supported the domestic industry's--

particularly the beet sector's--request for an increased

 

9Interviews with James Bonnen and Donald Horton; and
internal Executive Branch staff memoranda. Both committees
were to be comprised of representatives of Agriculture, State,
Budget, and the Council of Economic Advisors.

10Interviews with industry representatives and De-
partment of Agriculture staff. ‘ ‘

52

quota, to come from the foreign share of the market. Many
in Agriculture and the Executive Branch believed that the
large beet sugar surpluses were a direct result of that
Department's 1963-64 policies.ll

Meanwhile, the State Department was strongly fighting
any decrease in the foreign market share, and at the same
time attempting to make good on the commitments it had made
to foreign suppliers in 1963-64.

Cooley, Chairman of the House Committee on Agricul-
ture, insisted upon industry agreement--both internal and
with the Administration--before he would hold hearings on a
bill. In October, he unsuccessfully attempted to force
agreement through brief hearings on two short amendments.

As 1964 was ending, time was running out on the
foreign quotas, the legal basis of which was to terminate
December 31, 1964. Cooley's unwillingness to hold further
hearings appeared to place him in a strategic position, since
it was clear that sugar legislation could not pass without
the support of the House Agriculture Committee Chairman.

But in late October, the Agriculture Department de-
cided it had the legal authority to allocate foreign quotas
administratively for two years--but not to continue the
global quota or import recapture fee--since the basic statute

extended for that length of time. Although their legal

 

11Interview with James Bonnen.

53

authority to do this was questionable, USDA and Administra-
tion officials privately believed that they would not be
challenged in the Courts, but that if they were, new legis-
lation would have been enacted by the time any challenge

12 The Administration at the urging

could be made effective.
of the State Department based its quota allocation on 1963-
64 performance, with the latter year receiving double weight
(See Table 5). And so 1964 ended with no new legislation.

There were seven significant issues to be dealt

with in the early stages of the 1965 sugar experience:

Issues (1):

 

1. Domestic-Foreign Division of the Market. This was
the most important economic issue in 1965, and had split the
sugar industry so widely--and the Administration almost as
badly--as to result in legislative inaction.

2. Cuban Reserve. Ever since mid-1960, the name of the
foreign sugar game had been "how to divide the Cuban pie".
In 1962, the answer was the global quota. But opposition in
both Congress--particularly from Cooley-~and the State De-

13

partment ruled out this alternative in 1965. There was a

 

2Interviews with persons who were in the Department
of Agriculture and Executive Branch in 1964.

l3State's position was, as usual, a reflection of
its clientele--foreign countries-~who preferred the certainty
and security of set individual country quotas.

54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Table 5. Administration, House, Senate, and Conference Committee
allocations of foreign sugar quotas, 1965.
Adminis- House Senate Conference
Country tration bill . bill agreement
(Short tons, raw value)
A. For countries in the
Westerh Hemisphere:
Mexico 390,135 340,925 390,135 348,501
Dominican Republic 385,854 340,925 422,512 340,925
Peru 240,824 272,013 272,013 272,013
Brazil 221,558 340,925 272,013 340,925
British West Indies 122,017 150,397 122,017 136,000
Ecuador 49,770 50,267 49,770 49,770
Colombia 27,829 42,970 27,829 36,000
Costa Rica 34,786 42,159 34,786 40,000
Nicaragua 40,672 38,511 40,672 40,000
Guatemala 35,321 32,836 35,321 34,000
Venezuela 2,676 30,809 2,676 17,000
El Salvador 17,125 30,403 17,125 25,000
Haiti 18,731 28,782 18,731 18,731
Panama 14,449 25,134 14,449 25,134
Argentina 63,685 21,485 63,685 42,000
British Honduras 4,281 19,864 4,281 10,000
Bolivia - 4,054 1,000 4,054
Honduras - 4,054 1,000 4,054
French West Indies 50,841 42,970 42,970 42,970
Subtotal 1,720,554 1,859,483 1,832,985 1,827,077
B. For other countries:
Australia 186,772 162,152 162,152 162,152
China, Republic of 67,431 67,293 67,431 67,431
India 96,865 64,861 64,861 64,861
South Africa 96,865 29,593 66,584 48,000
Fiji Islands 45,489 24,323 35,489 35,489
Thailand - 19,864 - 15,000
Mauitius 14,985 14,188 14,985 14,985
Swaziland 9,098 6,081 6,081 6,081
Southern Rhodesia 9,098 6,081 6,081 6,081
Malagasy Republic 7,492 6,081 7,492 7,492
Ireland 2,141 - 2,141 5,351
Belgium 1,605 - 1,605 -
Turkey 1,605 - 1,605 -
Subtotal 539,446 400,517 436,507 432,923
C. Philippines 1:0501000 1,050,000 1,050,000 1,050,000
TOTAL 3,310,000 3,310,000 3,310,000 3,310,000
Source: U.S., Cong., House. House-Senate Conference Committee,

Suggr Act Amendments of 1965, Conference Report, House Report No.
I209, 89th Cong., lst sess., October 22, 1965.

 

55

desire by some in Congress and the State Department to de-
crease the Cuban Reserve from its 57.77 per cent, thus
permanently transferring some of it to other quotas. Given
the demise of the global quota, the Cuban Reserve that re-
mained had to be allocated to other countries. Which coun-
tries that were to share in that Reserve, as well as in the
Reserve's share of United States market growth, became im-
portant issues.

3. Allocation of Quotas. The Administration's alloca-
tion of quotas on the basis of 1963-64 performance met with
strong opposition in the House. Cooley viewed this as an
encroachment of his Committee's duties, if not authority.

He also felt that the 1963-64 episode was an aberration, for
which countries should not be penalized. Cooley made it
clear that the Committee would formulate foreign quotas on
its own, as it saw fit. The State Department, of course, was
adamant in its backing of the 1963-64 criterion.

4. Foreign Policy Considerations. The dilemma of agri-
cultural versus foreign policy was particularly strong be-
cause of the previous sugar policy commitments made by the
Sgate Department and the peak interest in Latin America; e.g.,
The Alliance for Progress, Castro, and the Dominican Republic.
This interest was intensified by the move of Thomas Mann
from Assistant Secretary for Latin American Affairs to Under-

Secretary for Economic Affairs, where he became State's

56

principal in sugar policy.l4 First, the Administration
wanted all deficits to go to the Philippines and Western
Hemisphere countries. Second, the House advocated special
consideration in the growth of the Cuban reserve to member
countries of the Organization of American States (OAS).
Third, the Administration favored restricting developed
countries' (primarily Australia and South Africa) share in
market growth.

5. Import Fee. One of the most volatile issues in sugar
policy, the fee had ardent supporters and detractors in both
the Administration and Congress. Its supporters included:

1) the Bureau of the Budget, which approved of recapturing
part of the premium for the Treasury; 2) the Council of Eco-
nomic Advisors, who approved of a decrease in the premium to
foreign producers; and 3) Congressional critics of the pro-
gram--along with some parts of the domestic industry--for
both of the reasons cited above. Opposition to the import
fee was led by the State Department and by Cooley, who called
it "immoral, based on unsound economics, an insult to our
friends in Latin America, and would result in eventual ruin

15

of the United States sugar program". State's opposition

 

14Interview with James Bonnen.

15U.S., Congress, House, a letter from Representative
Cooley to Speaker of the House McCormack, 89th Cong., lst
sess., October 19, 1965. Congressional Record, Vol. 111,
Part 20, p. 27400.

 

57

was headed by UnderSecretary for Economic Affairs Thomas
Mann, and was again a reflection of its foreign country
clientele, who, of course, desired as large a premium as
possible.

6. Time Extension of the Act. In order to bring pro-
duction and inventories into line with their market share,
domestic producers sought a long extension--preferably
through 1971. Foreign interests and the Refiners also fa-
vored a long extension, since this would assure the former
of participation in the United States premium market for
six years; the Refiners were assured of a stable set of
suppliers for that length of time.

7. World Shortages. Provisions were sought by the
Administration to deal with these; the 1963-64 experience

clearly indicated the need for them.

Political Process (2): Pre-Hearings

 

In order to give their extra-legal 1963-64 based
criteria for foreign quota allocations a chance to operate,
the Administration was in no rush to hurry sugar legislation
in early 1965, especially given the industry's--and its own--
discord.

The inter-agency technical committee made revised

16

recommendations in February. These included:

 

l6Internal Administration memorandum.

58

l. The sugar beet sector was to receive an immediate
increase of 375,000 tons at a consumption estimate of 9.7
million tons. The Mainland cane quota would increase by
205,000 tons. All growth between 9.7 and 10.4 million tons
was to go to foreign countries; at 10.4 it was estimated
that the domestic/foreign ratio would be at the level it
would have reached under the 1962 Extension. Market growth
after 10.4 million tons would return to the traditional 65
domestic/35 foreign split. At consumption estimates of 9.7
to 10.4 million tons domestic allocations would be:

Short Tons, Raw Value

 

Beet Sugar 3,025,000
Mainland Cane Sugar 1,100,000
Hawaii 1,110,000
Puerto Rico 1,140,000
Virgin Islands 15,000
Total Domestic 6,390,000

2. The 1963-64 performance was to be the formula for
foreign quota allocation.

3. An import recapture fee was to be imposed of not
more than 1.5 cents per pound.

4. Deficits would go to a global quota, which would be
subject to a 100 per cent recapture fee.

5. Safeguards against shortages were provided in the
form of letters of intent to fulfill quotas and scheduling

of shipments, with penalties for non—performance.

59

6. The market reserve for new beet areas was eliminated.
7. An expiration date of December 31, 1969 was proposed
for the legislation.

By late winter of 1964 representatives of the industry
sectors were meeting with Administration representatives and
members of Congress. On March 29, 1965 the domestic industry,
in reaction to the Administration prOposals, (which had been
informally communicated to all industry sectors), released a
set of proposals for the Act's extension, warning that if a
single word was changed the agreement would collapse.17
Although there was still intense conflict within the industry,
it was felt that a compromise had to be worked out at least
to 1) partially relieve the beet sector of its surpluses,
and 2) avoid the possibility of sugar legislation being
enacted without industry input--a situation cartel members

8 . . .
1 The1r major recommendatIOns were:

greatly feared.
l. The inter-agency technical committee's recommenda-

tion for an immediate increase in beet and mainland came

quota, with all market growth until 10.4 million tons to

foreign countries, etc.;

2. Extension of the Act through 1971, since they believed

 

l7Domestic Beet Sugar Industry, Mainland Cane Sugar
Industry, Hawaiian Sugar Industry, Puerto Rican Sugar In—
dustry, and the United States Cane Sugar Refiners' Associa-
tion, "Industry Sugar Recommendations" (press release,
Washington, D.C., March 29, 1965).

18

personnel.

Interviews with industry representatives and USDA

60

it would take that long to restore the desired domestic/
foreign balance in sugar supply;

3. Elimination of the global quota;

4. An import recapture fee;

5. Termination of the reserve quota for new domestic
sugar beet areas, since all increase in the beet quota would
be used to alleviate the beet sugar surpluses; and

6. A general desire for incentives for foreign countries
to maintain reserve stocks for the United States market.

The industry traditionally takes no stand on the
allocation of foreign quotas, and this was the case in 1965.

With an industry position now formed, the inter-
agency "political" committee met again to.develop a final
Administration position on sugar legislation. President
Johnson received the committee's recommendations on April 16,

1965.19

For the most part they paralelled the industry's
and technical task force's recommendations. The State De-
partment, however, still vigorously opposed the import fee,
which remained an issue.

By late Spring, the Administration was ready to go
to the Hill with a bill that would extend the Sugar Act
through l97l--as recommended by the industry, and supported

by the Agriculture Department. With two other exceptions

 

19Memorandum from the Inter-Agency Policy Committee
on Sugar to President Johnson dated April 16, 1965.

61

the bill included the task force recommendations, and had the
backing of the domestic sugar industry: There was no pro-
vision for a global quota, and the import recapture fee was
missing.

Johnson had indicated his support for a fee in spite
of Cooley's extreme distaste for one.20 Many State Departr
ment officials, of course, especially Thomas Mann, a long
time Johnson friend, Opposed it. Along with their general
support for their foreign clientele, they felt that the
fee hindered the development process in producing countries
by cutting into deeply needed foreign exchange. With in-
creasing attention being directed toward Latin America, it
was believed that the fee was harmful to United States re-
lations with that area, since most Latin American countries
held United States sugar quotas. In an effort to mollify
Latin American feelings after the United States invasion of
the Dominican Republic, Johnson summoned the Ambassadors of
Latin American sugar-producing countries to the White House,
and announced that the import fee would be dropped from the

21

Administration's bill. The industry immediately dropped

its support of the fee.

 

20Internal Executive Branch memoranda.

21Interview with Robert Shields.

62

Political Process (3): The House

Cooley waited until late August of 1965 to hold
hearings on the Administration bill. As Chairman, he had
always delayed sugar legislation until late in the Congres-
sional session for two reasons: 1) It lessened the chances
of lengthy analysis of, and debate over, the legislation;
and 2) in minimizing the opportunity for change after his
Committee produced a bill, it increased his power in deter-
mining what would be in the final legislation. This time,
however, there was an additional reason. The Johnson Ad-
ministration was trying to push a major revision of the farm
program through Congress, and its passage was uncertain. By
delaying sugar legislation the Administration was able to
bargain successfully for votes with supporters of the Sugar
Act, who might not have voted for the Omnibus Farm Bill if
it were considered on its own, rather than in the setting
of uncertainty about the future of the Sugar Program.22

Cooley had for some years relished the power he had

23 He made a point of meeting

in determining foreign quotas.
in private with foreign lobbyists. These meetings were the

basis of the impropriety charges.

 

22Interviews with practically all 1965 Administra-
tion personnel provided descriptions of this strategy.

23This observation was made in a number of the in-
terviews with industry and government representatives.

63

When the hearings began, Cooley made clear his dis-
satisfaction with Administration allocation of foreign quotas.
The Administration—-finally united in support of its pro-
posals--began the hearings with testimony on its bill, and
they were solidly backed by the domestic industry. The in-
dustry stressed the need for passage with no modifications.
Any change, however minor, they warned, could endanger the
delicate compromise which had finally been struck.24

‘ The industrial users testified in support of the
Sugar Act, but their spokesman received little questioning
from the Committee, and their recommendations appeared to
have an insignificant impact on the bill's outcome.

The House hearings lasted four days, with Cooley
running them with an iron hand. He often interrupted ques-
tions unfriendly to foreign lobbyists, and disallowed ques-
tions by Representative Paul Findley concerning the lobbyist's
fees. Most foreign lobbyists expressed dissatisfaction with
the Administration's bill--generally with the allocation of
quotas or deficits; Latin American representatives requested
preferences in deficits and market growth. All, of course,
wanted increased quotas.

In its executive sessions, at which domestic lobby-

ists were present, the Committee substituted its own bill

 

24U.S., Congress, House, Committee on Agriculture,
Amend and Extend the Sugar Act, Hearings, 89th Cong., lst
sess., 1965, p. 19.

 

for the Administration's.

64

25 It included virtually all of

the Administration's domestic proposals--these were the ones

the industry was concerned with--but significantly altered

the foreign aspects of the bill in the following ways:

1.

The Committee threw out the 1963-64 performance cri-
terion for foreign quota allocations, substituting
its own quotas, for thirty-two countries (including
one for the Bahamas, whose new sugar industry was
owned by a United States company, and had yet to
produce any sugar26 (See Table 5);

A further decline in the Cuban reserve to 44.25 per
cent was provided;

Gave deficits from Eastern Hemisphere countries to
other Eastern Hemisphere countries and the Philip-
pines;

Gave special consideration in the growth of the Cuban
reserve to O.A.S. countries;

Omitted the restriction on developed countries'
share in market growth; and

To deal with periods of tight supply, in effect re-

quired foreign quota holders to maintain 15 per

 

25U.S., Congress, House, Committee on Agriculture,

Report on Sugar Act Amendments of 1965, H. Rept., 1046, 89th

Cong.,

lst sess., 1965.

263y not using any publicly-enunciated objective

criteria for allocating quotas, the Committee left itself
open to charges of imprOprieties with lobbyists.

65

cent of their United States quota in reserve. Fail-
ure to do so could result in loss of the quota. The
Administration, over the State Department's opposi—

tion backed this last proposal.

Opposition on the House floor was led by Represent-
ative Findley and centered around foreign lobbying and the
allocation of foreign quotas; opponents claimed that no
objective criteria had been used in quota allocations. In
response to this, the Committee hastily put out a publica—
tion titled "The Development of Foreign Sugar Quotas in HR
11135", attacking the Administration's 1963-64 performance
criterion and defending their allocations on the basis of
nine considerations. They included as criteria, "stability
of government", "national policy and strategy", and purchase
of United States agricultural products, as well as the
ability to supply sugar, and past performance.27

With full backing from the domestic industry, the
bill passed the House, 246 to 147. But the debate had
focused public attention on the Sugar Act, creating public

distress and thus making the Act, itself, an issue.28

 

27U.S., Congress, House, Committee on Agriculture,
The Development of Foreign Sugar Quotas in H.R. 11135, 89th
Cong., lst sess., 1965, pp. 5-6.

28Editorials denouncing the Sugar Act, foreign lob-
bying, and Harold Cooley were commonplace in the popular
press. For example: Editorial, The Washington Post, Sep-
tember 20, 1965; Editorial, Wall Street Journal, November

 

66
As the bill went to the Senate, three issues had become

more important than all of the others:

Issues (2):

 

l. The Sugar Act. Public concern about United States
sugar policy, usually dormant, had been aroused in 1965.

The Act as an instrument of United States policy-~foreign
and agricultural--was being questioned by the public, the
press, and an increasing number of Congressmen. The growing
number of critics viewed it as an unnecessary subsidy to
domestic and foreign producers which hurt both consumers and
taxpayers. In addition, the foreign aid component was
viewed as uncontrolled, since it was not determined by the
usual aid criteria.

2. Sugar's Political Process. Public criticism was
primarily focused on this aspect of the Sugar Act, especially
on foreign lobbying. Concern was expressed in Congress as
well as in the press, over Cooley's dealings with foreign

29

lobbyists. The case of Venezuela and Argentina became a

cause celebre among lobbying critics. Argentina was the only

 

sugar supplier that did not hire a lobbyist; instead they
used diplomatic channels for their quota request. The Ag-
ribulture Committee decreased the Administration's quota for

Argentina by two-thirds. Venezuela had never supplied sugar

 

23, 1965; Editorial WashingtogPost, October 2, 1965.

"Playing Sugar Daddy to Sugar', Life, October 29, 1965, p.4.
"Sugar Stick-Up", Nation, October II, 1965, p. 206.

29Interviews with industry and government represent-

atives.

67

to the United States before. They hired a lobbyist for
$50,000. The Administration wanted a quota of 2,676 tons
for that country; the Committee granted it one of 30,809 tons.
Cooley's allowing domestic industry lobbyists to attend
Executive sessions of the Agriculture Committee did nothing
to ease the concern over the political decision process in
sugar legislation. In addition, this time Cooley's delay in
not bringing up sugar legislation until late in the session
had angered scores of Congressmen who felt the legislation
should not be rushed through Congress. As the bill reached
the Senate, the political decision process was becoming the
most important issue of the 1965 Sugar experience, since
this was where public and Congressional attention and dis-
satisfaction with the Sugar Act was focused.

3. Time Extension of the Act. Senators, especially,
were miffed over the lack of time they had to formulate sugar
policy. For this reason, many--especially John Williams and
William Fulbright--wanted a short extension (one to two
years) with full-scale Congressional hearings and study in

the interim.

Political Process (4): The Senate

The Senate Finance Committee received the House bill
in mid-October and held hearings for only one day. Most of
that day was spent questioning Administration representatives,

who urged the Committee to restore the Administration bill.

68

Intense opposition to the House bill, as well as
general concern over the Act itself, was expressed by a num-
ber of Finance Committee members, in particular Fulbright,
Williams, and Paul Douglas. Williams claimed that strong
Administration backing was essential if the House bill was
to be altered successfully, and the changes sustained in
Conference. They pressed Under Secretary of State Mann and
Agriculture Under Secretary John Schnittker on the need for
extending the Act, and whether the Administration preferred
the House bill to no Extension at all. Neither spokesman
gave a commitment either way. It was becoming clear that
the Administration's support for reform in the Sugar Program
would only go so far. Some Committee members expressed
strong support for a revival of the import fee; but Mann
made clear the Administration's (and his) opposition to the
fee.

The Committee substituted its own bill for the House
one. Long stated that the Committee "concluded that the
House distribution of foreign quotas would be difficult to
30

defend ' Except for extending foreign quotas for only

two years--the Finance Committee's bill closely paralelled

the Administration's. Table 5 shows the Committee's foreign

 

3OU.S., Congress, Senate, Senator Long speaking in
favor of S. 2567, to Extend and Amend the Sugar Act, 89th
Cong., lst sess., October 19, 1965. Coggressional Record,
Vol. 111, Part 20, p. 27374.

 

'4
h

69

quota allocation. The two-year extension of foreign quotas
was supported by many of those critics of sugar's decision-
making process, who felt that they had not been given ade-
quate opportunity to review the matter of foreign quota al-
location. It is uHcertain though, whether this short exten-
sion of the foreign provisions was in itself supported by
Committee members with ties to the sugar industry, or whether
it was included to win support from Senators--both in Com-
mittee and on the floor--who might not have supported the
Act's Extension if it included a lengthy extension of foreign
quotas.

Fulbright and Douglas led the opposition on the
Senate floor. Fulbright was incensed over many of the
foreign policy aspects of the bill—-in particular lobbying
and the uncontrolled foreign aid component of the Sugar Act.
As Chairman of the Committee on Foreign Relations, he felt
that his committee was the proper one in which to hold hear-
ings and formulate the foreign policy aspects of the Act.
The Finance Committee's two-year foreign extension was in-
sufficient to mollify Fulbright. He offered a narrowly de-
feated amendment--the opposition to it was headed by Long--
Which would remove foreign quotas from the bill, leaving
quota allocation to the Administration for another year, and
allowing Congress to review and examine fully the Sugar Act's

foreign provisions in its next session. As the bill passed

70

the Senate, Long gave assurances that the Senate Conferees
would not waver when sugar legislation came to a House-

Senate Conference.

Political Process (5): House-Senate Conference

 

,1
ll

Publicly the Administration expressed support for
the Senate version; but opposition from the Agriculture and
State Departments, combined with total Opposition from the
Refiners, to only a two-year foreign extension, limited the
effectiveness of that support.31

Williams had predicted that lack of total Adminis-
tration support would ensure passage of the House version.
It was uncertain how much the Administration had traded in
its quest for votes for the Omnibus Farm Bill, or how much
of its dwindling interest was due to weariness with sugar
issues.32 The Conference compromise, passed by both houses,
contained most of the key provisions of the House bill, in-
cluding the five year extension for foreign quotas. Long's
pledge of unwavering support for the Senate version had not
withstood the Conference battle.

Quotas tended to be closer to the House version,

(See Table 5), especially those the House considered crucial,

such as for Mexico, which had irked some Agriculture Committee

 

31Interviews with industry and government represent-

atives.

32Horton, "United States Sugar Policies", p. 32.

71

members because of its less-than-complete support for United

33 The House allocation of

States policies in Latin America.
deficits and growth prevailed while a compromise reduction
to 50 per cent was reached for the Cuban reserve.

Cooley called the Conference report a "complete
vindication of the House Committee on Agriculture".34 But
it was not a complete nor final one for Cooley. He was de-
feated for re-election in 1966, apparently partly because of

the role he cherished playing in sugar's political process.35

Issues (3): A Summary

 

1. Domestic-Foreign Division of the Market. The tech-
nical task force's recommendation of an immediate increase
in domestic quota--375,000 tons for the beet sector and
205,000 for mainland cane--at a 9.7 million ton Consumption
Estimate, with all growth until 10.4 million tons to foreign
suppliers, sailed through both Houses with full domestic in-

dustry backing.

 

33U.S., Congress, Senate, Senator Smathers speaking

in favor of S. 2567, to Extend and Amend the Sugar Act, 89th
Cong., lst sess., October 22, 1965. Coggressional Record,
Vol. 111, Part 21, p. 28248.

34U.S., Congress, House, Representative Cooley speak-
ing in favor H. 11135, to Extend and Amend the Sugar Act,
89th Cong., lst sess., October 22, 1965. Congressional
Record, Vol. 111, Part 21, p. 28555.

35

 

 

Interview with government representatives.

72

2. The Sugar Act and its Political Process. This issue
was IeftThanging. ‘The Conference Committee Report had passed
both houses with little difficulty. Although critics of the
Act had grown in number, they were still a minority in Cong-
ress, and with passage of the Extension, could be expected
to turn their attention elsewhere. No efforts, of course,
were made to reform the political process affecting sugar
legislation.

3. Cuban Reserve. This was reduced to 50 per cent.
Growth in the Reserve accruing from growth in the Consump-
tion Estimate was to go to OAS countries.

4. Allocation of quotas. The House version, based on
no set criteria, generally prevailed. (See Table 5).

5. Import Fee. This was dropped by President Johnson
in response to intense opposition from Latin American coun-
tries and their spokesmen in the State Department.

6. Time Extension of the Act. The industry's desire
for an extension through 1971 won Administration backing,
and became a key feature of the legislation.

7. World Shortages. Provisions were included to require
foreign suppliers to maintain 15 per cent of their quota in
reserve.

Despite the belief by many in the Executive Branch
that a veto would not be over-ridden in Congress, President

Johnson signed the Bill.36

 

36Horton, "United States Sugar Policies", p. 32.

re

73

Thus, after long and bitter controversy, the longest
extension in the history of Sugar Act was a legislative ac-
complishment. Sugar would be absent from the legislative
arena until 1971. Given the concern expressed in 1965 over
both the Sugar Act and its political process, changes could
be expected in 1971. Chapter VI describes the 1971 sugar

experience.

CHAPTER VI
THE 1971 EXPERIENCE

Since the 1965 Extension was based on a series of
compromises within the harried and warring domestic
industry, some observers felt that the 1971 Extension
might be preceded by the same kind of bitterness and con-
flict as in 1965, prompted by various industry sectors
attempting to overcome unfavorable parts of that com-
promise.1 This prediction proved false. The 1971 sugar
experience was relatively quiet, smooth, and harmonious--

the kind which cartels cherish.2

The Economic Setting

 

As 1971 approached, the economic situation in
sugar had pretty much returned to normal. The world
price had climbed back from lows of under three cents
per pound to within three cents of the United States

price. Demand had increased more rapidly than anticipated

 

1For example, see Horton, "United States Sugar
Policies," p. 1.

2Interviews with industry representatives and
USDA personnel.

74

75

in the United States--consumption in 1970 was over 11 million
tons. There were, however, some problems in the domestic
industry.

First, although continental production was once again
in balance with marketing quotas, acreage restrictions were
in effect in the mainland cane areas, as they had been in
every year of the 1965 Extension.

Second, Puerto Rican production continued to decline;
and in 1970 production there fell some 800,000 tons short
of quota. In addition, the Virgin Islands had stopped pro-
ducing sugar altogether. (Its quota had been 15,000 tons.)
These deficits were filled by the Philippines and Western
Hemisphere countries, and thus the actual domestic share
of the market--56 per cent--was well below the 62 per cent
target.

Third, a handful of older beet sugar producing
plants had closed down, leaving producers in those areas
without a market for their beets. Two plants closed due
to lack of scale economies and the inability to secure
capital to reach that size, and one because of the costs
involved for it to comply with new environmental quality
laws.3

Fourth, expanding beet production had just about

peaked in 1970. Although it had met it's 1970 quota, beet

 

3Interview with Robert Shields.

76

sugar production in 1968 had been about 200,000 tons short
of that year's quota. At the same time, some new areas had
expressed an interest in gaining beet quotas for the first
time. The 1965 Extension had stopped the Spread of sugar
beet production into new areas.

With sugar legislation about to enter the legisla-
tive arena for the first time in six years, eight issues

were in the United States sugar policy forefront.

Issues (1):

 

1. Need for an Increased Quota for the Mainland Cane
Area. Since this was the only domestic area where produc-
tion controls were in effect, the need for relief here was
strong. The key questions were: 1) How large the increase
should be--the mainland cane sector wanted a 500,000 ton
boost. This was seen as too large by the beet sugar
sector, since most of the increased output in Louisiana
would have to be marketed in the traditional beet areas
of the midwest; and 2) where the increase would come from.
Growth in the consumption estimate would not cover the
needed increase, and although beet sugar production appeared
to have peaked-and become relatively stable, it was still
politically infeasible to restrict that sector's share in
market growth. This left the Puerto Rican deficit or
foreign quotas, and since the former was being filled by

foreign countries, this meant that the immediate effect

77

of an increased mainland cane quota would be a decrease in
the foreign share of the market. This, of course, would be
opposed by foreign countries, and thus the State Department.

2. Puerto Rican Deficit. With rapidly declining pro-
duction in Puerto Rico, it was clear that at least part of
the deficit would be re-allocated. Puerto Rico was about
to embark on a five-year, $100 million program to revive its
sugar industry, thus the Commonwealth opposed re-allocation
of the total deficit. Since Puerto Rico is a domestic area,
the rest of the domestic industry felt that it should
receive the re-allocation. However, the real effect in
1971 of such a re-allocation would be to reduce the foreign
share of the market.

3. Payment Limits. Limitations on Government payments
to farmers of cotton, wheat, and feed grains had been a
landmark feature of the Agriculture Act of 1970. Payment
limitations might still be a live issue when Congress took
up sugar legislation. The domestic sugar industry, in
particular the Hawaiian sector where sugar payments aver-
aged $391,889 per farm in 1969,4 was upset over the
possibility of payment limits for sugar. From the domestic
industry's viewpoint, this was expected to be the most

important issue faced in 1971. Opponents of payment limits

 

4U.S., Congress, Senate, 92nd. Cong., lst sess.,
July 27, 1971. Congressional Record, Vol. 117, No. 118,
p. 812277.

78

for sugar claimed that that commodity was special because
of the tax on processed sugar. They claim that in 1971 no
producer received more than $9,050 in payments above the
excise tax on the sugar manufactured from his crop.5 How-
ever, given the high inelasticity of demand for sugar,
economists dismiss this claim since the tax is passed on.6
In addition, a study by Professor James Bonnen has shown
that government payments to sugar cane producers are more
concentrated than those to producers of any other commodity.7
In stunning contrast, Bonnen found that beet sugar payments
are the least concentrated of any commodity program.8

4. South African Quota. A concerted effort was build-

ing in Congress to eliminate the South African quota on the

grounds of that country's policy of apartheid. Those

 

50.8., Congress, Senate, Committee on Finance,
Sggar Act Amendments of 1911, Hearings, on H.R. 8866,
92nd. Cong., lst Sess., 1971, p. 44.

6Interviews with Roy Ballinger and Donald Horton.

7James T. Bonnen, "The Distribution of Benefits from
Selected United States Farm Programs," in Rural Poverty in
the United States, A Report by the President's National
Advisory Commission on Rural Poverty, (Washington, D.C.:
1960), pp. 461-505.

8Ibid., p. 505. Bonnen calculated Gini concentra-
tion ratios of .799 for governments payments to sugar cane
producers in 1965, and .456 for sugar beet payments in 1965.
In 1964, five per cent of sugar cane producers received
63.2 per cent of the government payments. In 1965, five
per cent of sugar beet producers received 24.4 per cent.
The relatively low concentration in sugar beet payments can
partially be attributed to the beet sector's political
strategy of spreading out quotas as much as possible.

 

79

favoring the quota claimed that South Africa's reliability
as a supplier of sugar was an important factor in the sta-
bility of supply for the United States market.

5. Expropriation. There was growing concern in Congress
over the actual and potential seizure, expropriation, and
nationalization of property owned by United States citizens
and corporations in foreign countries. Incidents included
the seizure of United States fishing boats by Ecuador--
which claimed a 200 mile territorial limit--and Peru's
nationalization of Grace Co. property. In 1962 the Sugar
Act was ammended to allow the President to suspend a coun-
try's sugar quota if expropriation without compensation
occurred. The provision had never been used, since the
State Department preferred that such matters be handled
through: 1) a country's judicial process, and 2) diploma-
tic channels.9 However, concerned Congressmen felt that
the Sugar Act was a suitable vehicle for sanctions--many
also believed that participation in the United States
market should not be opened to offending countries--and
that the expropriation clause needed strengthening.

6. Price Guide. Although the Act requested the Secre-

tary of Agriculture to base his consumption estimate on a

 

9See statement and questioning of Julian Katz, Deputy
Assistant Secretary of State for International Resources
and Food in, U.S., Congress, House, Committee on Agriculture,

Hearings, 1971, pp. 752-764.

 

80

number of considerations, that estimate was in administrative
practice based on a price guide, and the Sugar Act tied that
price guide directly to a parity price computation for
sugar.10 Some government economists and the industrial

users felt that this strict reliance on parity was raising
the price of sugar too rapidly.11 Increases since 1965 had

12

averaged 3.23 per cent annually. Users felt that the

Wholesale Price Index was a more stable, and more realistic
base to which to tie the price of sugar.13
7. Quarterly Quotas on Imports. Factoring annual
quotas into quarters had allowed the Secretary of Agriculture
to control the seasonal inflow of sugar, primarily to afford
added price protection to the mainland cane sector, whose
marketing of sugar is concentrated in the November through
February period. The Refining industry had long objected
to any interruptions in the flow of imported sugar; and the
relative quiet of 1971 allowed them to push for removal of
these_quotas.
8. Time Extension of the Act. The domestic industry

favored an extension of at least four, and preferably six

years, since they were pleased with the length of time of

 

0Interviews with Gary Seevers and Linwood Tipton.

llIbid.

12The United States Sugar Program, p. 11.

 

3Interview with Linwood Tipton.

81

the 1965 Extension. An extension over that period would also
mean not having to worry about payment limits for that amount
of time if they could be avoided in 1971. The Administra-
tion, particularly the State Department, favored a short
extension of two or three years, since the world sugar situa-
tion could change significantly in that period for three
reasons: 1) Britain's possible entry into the Common Market,
and thus the possibility of termination of the Commonwealth
Sugar Agreement; 2) re-negotiation of the World Sugar Agree-
ment--of which the United States is not a member--at the

end of 1973; and 3) expiration of the current treaty with

the Philippines. Industrial users also favored a short

extension.

Political Process (1): Pre-Hearings

The Industry

 

There was little internal conflict within the domes-
tic industry as 1971 approached. Industry representatives
met in November of l970--at the urging of House Committee
on Agriculture Chairman Robert Poage--to begin formulating
a single set of industry proposlas for the Sugar Act's
Extension. Because of their intense fear of payment limita-
tions, and possibly due to memories of the politically costly

1964-65 experience, they placed a high premium on unity.l4

 

4Interviews with industry representatives.

82

Industry interaction with the Administration was
minor, a fact that irked a number of industry representa-

15 Thus, the industry developed virtually all of its

tives.
recommendations without Administration leadership or feed-
back. Their major early recommendations included: 1) a
six-year extension; 2) at an 11.2 million ton consumption
estimate, an increase of 300,000 tons in the mainland cane
quota, with the stipulation by the beet sector that the
increase would not alter the traditional 73.3/26.7 per cent
beet sugar/mainland cane share in domestic growth; 3) the
mainland cane quota increase to come from a decrease in the
Puerto Rico quota by 285,000 tons and elimination of the
Virgin Islands quota; and 4) a 100,000 ton quota for new
mainland cane areas (principally Texas, which had produced
cane earlier in the century), to come from growth since

16 This would give the following

1970 in the foreign quota.
domestic allocation at a consumption estimate of 11.2 million
tons:

Short Tons, Raw Value

 

 

Beet Sugar 3,406,000
Mainland Cane 1,539,000
Hawaii 1,110,000
Puerto Rico 855,000
Total Domestic 6,900,000
152219;

16

U.S., Congress, House, Committee on Agriculture,
Heariggs, 1971, pp. 37-42.

 

83

The cane refiners knew they had to offer the main-
land cane area something to ameliorate the effect of the
elimination of quarterly quotas.- They devised a "corridor
mechanism" which would allow the price of sugar to fluctu-
ate, but only three per cent above or below the target price
for five consecutive market days. Then the Secretary could
alter the consumption estimate, to adjust the price. The
mainland cane sector readily agreed to this; as did the
industrial users, in principal.

As hearings began, the industry was still trying to
deal with the payment limits and quarterly quota issues.

In addition, Robert Poage, Chairman of the House Committee
on Agriculture, and ranking minority member Page Belcher
insisted that other industry sector representatives meet
with the representatives of the industrial users to work

out any differences, thus presenting a united front to
Congress. The Committee leaders were determined to avoid

a floor fight, and it was felt that a single industry-

users set of proposals would help.17

The users were concerned with the guide price
issue, and favored substituting the Wholesale Price Index
for the parity index. The domestic industry wanted to

cling to parity; and the two groups finally agreed on a

 

17Interviews with industry and government representa-

tives.

84

simple average of the two as the basis for the guide price.
They also agreed to a change which would make the guide
price the sole determinant of the consumption estimate
bringing the legislation into line with historical adminis-
trative practice. In addition, the users favored: 1)
elimination of quarterly quotas; 2) earlier determination

of the consumption estimate; 3) earlier declarations of
deficits; 4) a wider corridor (five per cent for ten days)
to allow price fluctuations which would encourage a resur-
gence of the waning sugar futures market; and 5) a three-
year extension. The industry agreed with all the recommenda-
tions but the three-year extension and the width and time of

the corridor mechanism.

The Congress

 

Poage was determined to avoid the public distress
which had marked the 1965 sugar legislation experience.18
He 1) insisted on an early unified industry position; 2)
issued an Open invitation to testify to anyone interested
in the legislation; 3) refused to meet privately with
foreign lobbyists; 4) rotated the Chair among all Committee

members during the Hearings; 5) began the hearings early in

the Congressional session and; 6) sent a letter to foreign

 

18Interviews with Hyde Murray, Robert Shields,
John Bagwell, and Irving Hoff.

85

lobbyists requesting them to direct their testimony to five
points, which he said the Committee would use as its criteria
in allocating foreign quotas. These included: 1) Friendli-
ness of government to the United States; 2) Dependability as
a source of sugar supply; 3) Reciprocal trade balance;
4) Need of the country for a premium market; and 5) Extent
to which the premium is shared by processors, farmers, and
workers.19
Poage and Belcher met occasionally with industry
representatives in late 1970 and early 1971, to discuss the
upcoming legislation. They were generally agreeable to the
industry proposals.20 Belcher, however, insisted that pay-
ment limitations would not be a problem in Congress, and
that the industry was foolish to worry about them.21
Belcher's main role was that of intermediary between the
Committee--and the industry--and the Administration. He
assured the industry that the Administration would oppose

any attempts to implement payment limits in sugar.22

 

19U.S., Congress, House, Committee on Agriculture,
Hearings, 1971, pp. 287-290.

20Interviews with industry and government representa-

tives.

21Ibid.

22Ibid.

 

86

The Administration

The Administration formed an inter-agency sugar
study group in late 1970. As usual, Agriculture took a posi-
tion similar to the industry's; whereas the State Department
advocated minimal change, and a two-year extension. Just as
the conflict in the industry was not strong in 1971, neither
was the split between the Agriculture and State Departments.
The main concern of the State Department was limiting as
much as possible the effective decline in the foreign share
of the market. The group never really developed a formal
proposal, and ceased to function as a group in January 1971.

In meetings with industry representatives, Adminis-
tration officials gave no comment either way on the

23 The only suggestion made was a

industry's proposals.
plan to circumvent payment limitations. This seemed odd

to Congressional observers who were aware of the understand-
ing between Belcher and the Administration.24 In spite of
Belcher's urging otherwise, the industry adopted a modifica-
tion of the plan as part of its recommendations. It involved

a simultaneous reduction in both payments and the excise

tax--although the tax on imported sugar would remain at the

 

23Interviews with Robert Shields, Horace Godfrey,
Irving Hoff, and John Bagwell.

24Interviews with industry and government representa-

tives.

87

former level. On the surface, the effect would be to limit
payments to just over $60,000 per farm, but its impact--as

intended--would essentially be neutral, since both the tax

and payment were reduced.

After its study group faded away, the Administra-
tion's interest in sugar legislation waned until March.25
Hearings had begun, the industry had developed proposals,
yet the Administration was silent. With Congressmen, espe-
cially Belcher, applying pressure, the Administration turned
its attention to sugar legislation. At this point the
Administration's internal proceedings were characterized
by general contentment with the Sugar Act since 1965, and
thus no radical changes were considered.26

The Administration position, not fully certain
until the night before it was to testify,27 was based on
general acceptance of the industry proposals with the fol-
lowing modifications: 1) a three-year extension; 2) a
formula for market growth which would benefit foreign
suppliers for the first 530,000 tons of growth--to compen-

sate foreign countries for their loss of the Puerto Rican

deficit, and the quota for new mainland cane areas; and

 

25Interviews with government representatives.

26Interviews with Executive Branch staff.

7Interviews with industry and government representa-
tives.

88

3) Opposition to the industry's tax-payment plan.28 This

last decision was made by President Nixon--presumably forced
to his attention by opponents of the scheme, led by Belcher,
and including the State and Treasury Departments. Opponents
felt, first, that no payment limits with no change in the
tax-payment scheme was preferable to the industry plan; and
second, the dual tax might be in violation of the GATT
(General Agreement on Tariffs and Trade), and thus compli-

cate the country's international relations.

Political Process (2): The House

Poage began hearings in early February with a day
of descriptive and technical testimony from the Adminis-
tration, which at that time declined to recommend any
proposals for the Act's extension. The purpose of the
15 other days of the hearings, which ran from the beginning
of March through May 6, was also to develOp legislation,
rather than to hear testimony on a specific bill.

Some members of the Committee seemed content to
let the bill's main domestic provisions be determined by
industry-industrial users compromise, with the Committee

29

settling areas of disagreement. The primary points of

 

28U.S., Congress, House, Committee on Agriculture,
Hearingg, 1971, pp. 745-758.

29Ibid, p. 76.

89

disagreement were the time extension of the Act and the
width and time of the corridor mechanism.

Foreign lobbyists--one of whom was none other than
Harold Cooley--generally based their testimony on Poage's
five criteria.

For the first time in sugar legislation history,
testimony was heard from groups representing domestic sugar
workers and small, marginal farmers. For the former they
urged an updating of the worker benefits section of the
Act to require additional labor practices and standards,
as well as increased wages and fringe benefits. They
asked for increased payments for the marginal farmer.

A spokesman representing a Washington, D.C. con—
sumer group testified against the Sugar Act and was unique
in receiving hostile treatment from the committee.

A number of witnesses testified in favor of a
stronger exprOpriation clause.

The Committee was sympathetic to the confectionary
industry's request for import quotas on confectionaries.
The belief here was that the higher than world cost of
sugar in the United States put American confectioners at
an absolute disadvantage in competing with imports.

The Administration closed the hearings with its

recommendations. Their opposition to the tax-payment plan

90

came as a complete surprise to the industry, which had devel-
oped it at the Administration's suggestion.3o
The bill reported out of the Committee incorporated
most of the industry-users recommendations. The life of
the legislation was set at three years--at the insistance

31 The

of Findley, the Act's leading critic, and Poage.
corridor device was compromised at four per cent for seven
days. 100,000 tons of the market growth increase in the
beet sugar quota was to be reserved for new areas. The
Puerto Rico quota was cut by 285,000 tons for only the
first two years of the Extension; the third year decline
would be 140,000 tons. The-tax-payment plan was not
included; nor were payment limitations.

The bill had no new provisions relating to sugar
workers. Ammendments along those lines had been offered
in Executive Session by Spark Matsunaga of Hawaii, but they

32

were defeated. The Agriculture Committee favored import

quotas on confectionaries, but they were not included in
the bill due to a jurisdictional request by Ways and Means

Committee Chairman Wilbur Mills.33

 

30Interviews with industry representatives.

31Interviews with government representatives.

321bid.

 

33U.S., Congress, House, Committee on Agriculture,
Report on Sugar Act Amendments of 1971, H. Rept. 92-245,
n Cong., lst sess., 1971, p. 8.

91

The expropriation section was strengthened to allow

the President to fine a country via a tax on the premium

(up to $20 per ton), as well as suspending its quota.

The changes made in the allocation of foreign quotas,

deficits, and growth were relatively minor (See Table 6).

Poage appointed a sub-committee--headed by Thomas Abernathy--

to allocate the quotas, and it was clear that it based its

allocations primarily on the reliability of supply, rather

Table 6. House, Senate, and Conference Committee allocations

of foreign sugar quotas, 1971 (Short tons, raw

 

 

 

value).
Conference
Country House Billa Senate Billb Substitute
Mexico 537,545 590,894 561,581
Dominican Republic 525,737 659,874 634,874
Brazil 525,737 577,905 547,905
Peru 418,932 391,839 391,839
West Indies 192,251 204,520 204,520
Ecuador 80,774 79,084 80,774
French West Indies 0 63,888 0
Argentina 76,050 67,062 75,050
Costa Rica 65,185 71,110 68,610
Nicaragua 65,185 64,217 64,217
Colombia 73,688 61,047 67,363
Guatemala 55,265 59,835 58,350
Panama 41,567 40,406 41,557
El Salvador 40,151 43,964 42,693
Haiti 30,704 30,305 30,704
Venezuela 36,845 61,025 61,026
British Honduras 33,537 14,874 33,537
Bolivia 17,005 6,193 6,193
Honduras 17,005 6,494 11,760
Bahamas 33,537 10,000 27,000
Paraguay 15,116 0 6,193

Western Hemisphere

 

 

 

2.881‘866

1.121;};

3,016,751

Iiajl

92

Table 6.--Continued.

 

 

b Conference

 

 

 

 

 

Country House Billa Senate Bill Substitute
Australia 205,025 196,162 203,785
Republic of China 85,844 81,734 84,910
India 82,494 77,973 81,514
South Africa 60,300 57,745 57,745
Fiji Islands 44,806 43,034 44,719
Thailand 18,844 14,152 18,681
Mauritius 30,150 17,761 30,150
Malagasy Republic 15,075 9,223 12,149
Swaziland 30,150 7,084 10,150
Malawi 0 0 0
Uganda 15,075 0 15,075

Eastern HemiSphere 588,763 504,858 578,878
Philippines 1,314,020 1,300,264 1,314,020
Ireland 5,351 5,351 5,351

Total 4,790,000 4,915,000 4,915,000

 

aFor 1973 and subsequent years the quota for Panama
would be increased to 62,947 tons and a quota would be
established for Malawi of 15,000 tons and other quotas
reduced proportionately. This allocation reflects the
allocation and proration of 500,000 tons of domestic defi-
cits to foreign countries.

bThis allocation reflects the allocation and prora-
tion of 625,000 tons of domestic deficits to foreign
countries.

Source: U.S., Congress, House, House-Senate Conference
Committee, Sugar Act Ammendments of 1971, 9927
ference Report, House Report No. 92-527, 92d.
Cong., lst sess., September 29, 1971.

 

93

than on the five criteria.34 The Committee did not adopt
the Administration proposal for preference in growth to
foreign countries; and the OAS preference in market growth
of the Cuban Reserve was eliminated. The Cuban Reserve
was reduced to 23.74 per cent.

As usual, the bill came to the House floor on a
closed rule. Critics believed that the bill should contain
payment limitations. Bitter opposition was focused on the
continued quota for South Africa, but attempts to open the
bill to ammendments failed, and the bill passed the House
intact.

As sugar legislation headed for the Senate, it was
surrounded by little controversy. However, four issues,
two of which were considered crucial by Congressional
liberals and one by the State Department, remained to be

dealt with in the Upper House.

Issues (2):

1. South African Quota. As the bill headed for the
Senate, the South African quota had become the major issue
of 1971. Proponents of the quota would not yield on the

issue. Domestic industry opposition to its removal was

 

34Representative Wiley Mayne, in his dissent to the
Committee Report, stated that the five criteria "were
largely ignored by the Subcommittee." U.S., Congress,
House, Committee on Agriculture, Report on Sugar Act
Amendments of 1971, p. 48.

94

strong; the industry and their supporters in Congress felt
that any attempt to modify the bill could lead to danger
for other features of the Act.35 Since the Senate does not
have a closed rule, it was clear that a showdown--forced by
liberals--on the South African quota was imminent.

2. Tax-Payment Plan. In focusing their attention on
the South African issue, most liberals were no longer
greatly concerned over the matter of payment limitations.
Thus, the heat on the domestic industry over that issue
had been pretty much removed. The industry had favored
the tax-payment plan as a second-best alternative--to no
change and no payment limits. Thus they were pleased with
the Administration's opposition, and its absence from the
House bill. The Hawaiian sector, however, wanted to remove
payment limitations as a potential issue. Given this and
the possibility of attempts to limit payments on the Senate
floor, the industry still backed the plan in its Senate
testimony.

3. Foreign Preference in Market Growth. The State
Department was actively campaigning for this Administra-
tion prOposal because of the loss to foreign suppliers

from the re-allocation of the Puerto Rico deficit and the

new mainland cane area quota. Preference was strongly

 

35One industry lobbyist, in an interview, expressed
his opposition strongly: ”If they started tearing the bill
up here, you never know where they would end."

95

Opposed by the domestic industry. Since this proposal was
part of the official Administration recommendations, the
Agriculture Department had to give it tacit approval. But
it is likely that Agriculture privately opposed it, given
the strong domestic industry Opposition.
4. Import Quotas on Confectionaries. The mood of the if
Congress was swaying from free trade to protectionism, and
thus there was strong support for these restrictions in
both Houses--Wilbur Mills, not withstanding. The Adminis-

tration was strongly opposed.36

Political Process (3): The Senate

The Senate Finance Committee hearings were rela-
tively uneventful, primarily because that Committee was
generally in agreement with the House bill. Cooley,
representing Liberia and Thailand, was upset with the
House Agriculture Committee's treatment of those countries,
and urged the Senate Committee to rewrite the Sugar Bill
for the first time in history.

Some Committee members, particularly Fred Harris,
strongly supported new provisions for worker benefits.

The industry and users offered repeats of their

House testimonies. But the Administration, especially the

 

36U.S., Congress, House, Committee on Agriculture,
Hearings, 1971, p. 758.

96

State Department, came on much stronger than they had in the
House. They urged adoption of the preferential growth
formula for foreign countries, with the State Department
claiming that its absence from the final bill would make

the 1971 Extension less desirable than a simple extension

of the 1965 Act.37

They also Opposed the decline in the
Cuban Reserve .

The Administration favored a continuation of South
Africa's quota; and said they could live with the House's
expropriation clause. They felt this support might stave
off a stronger measure in the Senate bill.

The Committee's bill closely paralelled the House
bill, and the domestic provisions were almost identical,
except for decreasing Puerto Rico's quota by 285,000 tons
for all three years.

Long substituted a formula giving preference to
Western Hemisphere countries and based on past performance,
for the House's five criteria, (See Table 6). But except

for retaining the Cuban Reserve at 50 per cent, the changes

made were minor.

 

37U.S., Congress, Senate, Committee on Finance,
Sugar Act Amendments of 1971, Hearingg, on H.R. 8866, 92nd
Cong., lst sess., 1971, p. 54. The State Department was
under pressure from all sides because of their foreign
clientele. In addition to the growth formula conflict,
they were also in the forefront on the South African and
expropriation battles.

97

In its report, the Committee stated as one of the
bill's purposes "an improvement in the effectiveness of the
anticonfiscation provision," and thus the expropriation
clause was further strengthened to include a hearing process
for United States citizens who claimed they had been damaged,
and requiring, rather than permitting, the President to
act--app1ying either the fine or suspension of the country's
quota, or both.38 The bill included quotas on confectionary
imports.

As expected, the Senate floor was the setting for a
bitter battle over the South African quota. The ammendment
to delete the quota from the bill was defeated by only two
votes. In hOpes of gaining the crucial swing votes from
Senators with strong ties to the domestic industry, oppon-
ents of the quota offered another ammendment transferring
the South African quota to the domestic allocation. The
domestic industry, however, strongly opposed it. They
feared "unnecessary" changes, and the Northeast refiners
would lose the volume of sugar from the South African quota.
The ammendment was defeated.

Ammendments were offered to require increased

benefits and improved living conditions for sugar workers,

but they were easily defeated. An ammendment, offered by

 

38U.S., Congress, Senate, Committee on Finance,
Sugar Act Amendments of 1971, S. Rept. 92-302, 92nd Cong.,
ISt sess., 1971, p. 1.

98

Ellender, was accepted which changed the corridor mechanism
back to the industry's three per cent for five days.
Ellender's maneuver irked the users and insustry representa-
tives from sectors other than the mainland cane area, par-

ticularly the refiners.39

Political Process (4):
House-Senate‘CofiIerence

 

 

The Conference Committee, whose report was passed
by both Houses, accepted the key foreign aspects of the
House bill, including the decline in the Cuban Reserve,
although it generally compromised on the allocation of
quotas. One effect was to increase the reliance on the
"Big Four" Western Hemisphere countries of Mexico, the
Dominican Republic, Brazil, and Peru (See Table 6). The
Senate version of the corridor mechanism would apply only
for the four months critical to the harvesting of mainland
cane. Confectionary quotas were included. The House

version of the expropriation clause was accepted.

Issues (3): A Summary

1. Increased Quota for the Mainland Cane Area. That
area was given a 300,000 ton boost to come from a decline
in the Puerto Rican quota, and elimination of the Virgin

Islands quota.

 

39Interviews with industry representatives.

99

2. Puerto Rican Deficit. 285,000 tons of the Puerto
Rican quota was permanently reassigned to the mainland cane
area.

3. Foreign Preference in Market Growth. This State
Department proposal to compensate foreign suppliers for the
loss of the Puerto Rican deficit was not included in the
legislation. OAS preference in the growth of the Cuban
Reserve was eliminated.

4. South African Quota. Proponents were able to over-
come opposition, particularly strong in the Senate,-and
thus South Africa would continue to supply sugar to the
United States. At a consumption estimate of 11.2 million
tons, its quota would be 57,745 tons.

5. Payment Limits. These were not included in the
legislation, nor was the domestic industry's tax-payment
plan--which had been designed and offered to neutralize
the effects of payment limitations.

6. Expropriation. Growing concern in Congress led to
strengthening of the expropriation clause in the Sugar Act.
The 1971 Extension allows the President to suspend a coun-
try's quota, or fine the violating nation by taxing the
premium up to $20 per ton, or both.

7. Price Guide. This became the sole determinant of
the Consumption Estimate, and its basis was changed from a

parity concept to an average of one measure of parity and

the Wholesale Price Index.

100

8. Quarterly Quotas on Imports. These were eliminated.
9. Time Extension of the Act. The Sugar Act was
extended for three years, through 1971.
10. Import Quotas on Confectionaries. These were pro-

vided for, over the objections of the Administration.

 

CHAPTER VII
1965 AND 1971: A SUMMARY AND COMPARISON

Four considerations are used in the descriptive
comparison of the 1965 and 1971 sugar experiences:
1) Economic conditions in both the domestic industry and
world market; 2) The political processes involved; 3) The
major issues involved, and how they were treated; and

4) The legislative outcomes.

Economic Conditions

There was great contrast in both the 1965 and 1971
settings and the two-year preceding periods. The world
shortage of 1963-64 caused world sugar prices to skyrocket
above the United States price for the first time since
1957. Encouraged by the Department of Agriculture, domes-
tic production rapidly expanded. By late 1964, the world
price had nosediVed to 2.75 cents per pound, and the domes-
tic industry, whose production controls had been removed in
the early 1960's in response to the suSpension of the Cuban
quota, was holding large unmarketable stocks.

By 1970, the world sugar situation had returned to

normal. World price had recovered from lows of under three

101

102

cents per pound and was back over five cents per pound by

mid-1970. The 1965 Extension had returned the domestic

industry to relative balance, but there were two significant

problems in 1971 that had to be dealt with: l) the main-

land cane area was under acreage restrictions, as it had

been since late 1964; and 2) Puerto Rico's deficit had A
grown to over 800,000 tons in 1970. In addition, domestic
sugar beet production, although meeting its quota in 1970,
had failed to do so in two of the years since 1965. The
highly successful expansion of United States beet sugar
production clearly had been approaching its limit, given

the current state of technology.

Political Processes

The Industry

 

In 1964-65, the domestic industry was beset with
internal conflict and turmoil, primarily because of the
beet sector vs. cane refiners battle over the domestic/
foreign share of the market. The industry entered 1971 in
relative harmony. In addition that year, the industrial
users effectively entered the decision process--they met
with the domestic industry to formulate joint proposals
for the Act's extension for the first time in the Sugar
Act's history. In 1965, the industrial users did not par-

ticipate in intimate industry deliberations.

103

The Administration

 

In 1963 through 1965, the Administration took an
active, policy-making role in sugar legislation. An inter-
agency staff committee formulated technical recommendations,
most of which were approved by the President, and which
after some modification served as the basis for an industry-
backed Administration bill. However, the Administration,
it should be remembered, delayed transmission of the bill
to Congress to help insure passage of its Omnibus Farm Bill.
As Congress altered the foreign provisions of the Adminis-
tration's bill, the Administration at first vigorously
attempted to restore them, but by the time sugar legisla-
tion came to a House-Senate Conference, active Administration
support for its original proposals was minimal.

In 1965, there was conflict between the Departments
of State and Agriculture--a conflict which mirrored that of
the economic interests. Agriculture supported the beet
sugar and mainland cane sectors, while State's views were
a reflection of the concerns of foreign countries and the
cane refiners. The State-Agriculture conflict was rela-
tively minor in 1971.

In 1971, the Administration chose to play basically
a defensive role in the formulation of sugar legislation.
Although they did form an inter-agency sugar task force,
it offered no proposals, and the Administration did not

send a sugar bill to Congress. In addition, they waited

104

until the last day of House hearings to present their recom-
mendations.. These were not finalized until the night before
their testimony, and much of the position consisted of
approval of the industry-users proposals. Industry-

Administration interaction was minor.

The Congress

 

The 1965 CongresSional process in sugar legislation
was met with heavy criticism. Committee on Agriculture
Chairman Harold Cooley ran the four days of House hearings
with an iron hand; met privately with foreign lobbists;
allowed domestic lobbyists to attend Executive sessions of
the Committee; substituted a Committee bill for the Adminis-
tration's, altering the foreign aspects including the
allocation of foreign quotas; and gave no criteria for the
Committee's allocation of foreign quotas until public
criticism forced him to do so, when he responded with a
set of nine ex post criteria designed to justify the
Committee's quota allocation.

The Senate Finance Committee substituted a bill
of its own--which was very similar to the Administration's--
for the House version. The House-Senate Conference com-
promise, however, tended to reflect the House bill.

Although foreign lobbyists testified again in 1971,
sugar legislation found itself in the relative obscurity to

which it had been accustomed for so long. House Agriculture

105

Chairman Robert Poage carefully avoided the actions which
had focused intense criticism on his predecessor and there-
fore on the political decision process of sugar policy.

The changes made by the Senate in the House bill
were not major, and the heated debate in that chamber in
1971 was not over the Act or its process, but over one
issue--the South African quota. In 1971, the House-Senate
Conference report was much more of a compromise than that

of 1965.

Issues

In 1965, the heavy criticism focused on sugar's
political process--primarily on the lobbying and foreign
quota aspects--made it and the Sugar Act itself major
issues for the first time since the Act's inception in
1934. That distress was clearly not evident in 1971; and
in 1971, neither the Act nor its decision process were
significant issues.

The need for increased quotas to allow domestic
producers to market their surplus, made the domestic/
foreign division Of the market a significant issue in
1965.1 The inter-agency task force's recommendations of an
immediate increase in the domestic quota, with foreign
preferences in market growth until the normal balance was
regained, was the compromise which enabled the domestic

industry to end its intense conflict. This compromise

106

required a long extension of the Act, since the industry
felt it would take until the end of 1971 to achieve the
desired balance in market shares.

How to deal with future world shortages was an
important concern in 1965, especially given the domestic
industry's abhorence of maintaining increased inventories. /‘
The result was, in effect, to require foreign countries
supplying sugar to the United States to maintain 15 per
cent of their basic quota in stockpiles. This feature was ‘4
strongly resisted by the State Department. The allocation
of foreign quotas and deficits, treatment of the Cuban
Reserve and market growth, and the import fee were impor-
tant issues in 1965; but they attracted far less attention
as issues in 1971.

The issue of the South Africa quota--which had also
been raised in Executive Branch discussions in 1965--was
the most important issue in the 1971 sugar experience. It
overshadowed all of the others--including payment limita-
tions, about which the domestic industry was living in
dread and apprehension. As a result of this fear, and to
overcome the affects of payment limits, they developed
their tax-payment scheme.

How large an increased quota the mainland cane
sector would receive, and where it would come from, were

important, though not highly-charged 1971 issues. The

massive Puerto Rican deficit provided a relatively easy

107

solution to these questions, although the transferring of
285,000 tons of it would have an adverse effect on actual
foreign participation in the market. For this reason, the
State Department strongly advocated preference in market
growth for foreign countries.

From Congress's viewpoint, the expropriation issue
had become important in 1971.

Issues dealing with more technical and administra-
tive aspects of the Sugar Act were of relatively more
importance in 1971 than 1965. These included: 1) the
termination of quarterly quotas; 2) the corridor mechanism;
3) the price guide; and 4) earlier determination dates by
the Secretary of Agriculture.

Finally, increased benefits and improved conditions
for sugar workers was an issue championed by Congressional

liberals, particularly in the Senate, in 1971.

Legislative Outcome

 

Table 7 shows the quotas for domestic producing
areas for the years preceding and following the 1965 and
1971 Extensions. Table 8 does the same for foreign quotas.

In its allocation of foreign quotas and the removal
of the import fee and global quota, the 1965 Act set the
pattern for the 1971 bill. The two Extensions were very
similar in the direction which they led United States sugar

policy, i.e. toward a more effective cartel. In general,

108

 

 

 

Table 7. Sugar quotas for domestic areas: 1965, 1966,
1971, 1972 (Short tons, raw value).
Area 1965a 1966a 1971b 1972b
Beet Sugar 2,650,000 3,025,000 3,406,333 3,406,000
Mainland Cane 895,000 1,100,000 1,238,667 1,539,000
Hawaii 1,100,000 1,100,000 1,110,000 1,110,000
Puerto Rico 1,140,000 1,140,000 1,140,000 885,000
Virgin Islands 15,000 15,000 15,000 -

Total

 

5,810,000 6,399,000 6,910,000 6,910,000

 

a
Estimate.
b

Estimate.

Source:

Allocation based on 9.7 million ton Consumption

Allocation based on 11.2 million ton Consumption

U.S., Congress, House, Committee on Agriculture,
Sugar Act Ammendments of 1965, H. Rept. 1046, 89th
Cong.,‘lst sess., 1965, p. 19.

U.S., Congress, House, Committee on Agriculture,
Report on Sugar Act Ammendments of 1971, p. 2.

{-1.

109

 

 

 

 

 

evib I I I >Osememe
nee.e aae.e eme.e I we>eeoe
mow.na mma.n I I mmespcom
www.mm ooo.oe I I mmEmsmm
mmo.em eeo.mm eem.e~ oom.m~ eeewm
mmm.em oom.me www.me aeo.m wweseaom eweeeem
www.5e ama.me eom.ee moa.o~ eoem>ewm em
ome.~m ema.mm ee~.oe moe.me mewEwewsw
mee.ee eam.om mmo.em mem.m wewemwew>
mea.oe mme.ee ooo.ae eae.ae weewewwez
ame.ee mae.ee ooo.me mom.ee wEweme
ewe.ee mmm.me ham.om eme.em weQEseoo
mee.nm mme.ee emm.ee www.me wwem wewoo
eee.em emm.ee omm.mm eem.ee meeecweee
mow.am ~ma.em oem.ae eem.oe eoeweom
eme.emm mee.mom emm.eee mee.mee wwewee ewwz
oom.eme Nom.~me mem.emm mam.ma~ sewe
emm.eoe mee.eoe mee.mee me~.ae~ eeewem
mem.-m www.mee eam.mme eem.eee ooexwz
new.moe oem.mme ema.~oe mmm.aee weeesewm ewoeeHEoe
oea.eoe.e mme.mam.e mea.mom.e ee~.eee.e wweeeeeeeee
ememe weeme eweae wmeme eeeesoo
.AOSHO> Ewe .mcou Deonmv meme
tam .Hema .omma .mmma "mcoeumeoem tam .mueoeMOp .mmuosw emmsm :meOeom .m OHQOB

110

.tha ..nOh em

 

.e .bmm

 

 

 

 

 

“meme ..ewe .me .e .emm
lemme ..ewe .ee .e .mbe

“meme ..cmb the .m .eme mueomOm emmsm "Ooesom

.OuOEHumm aoeumfismcoo sou COeHHHE o.NH so UOOOQ GOeumooafiap

.OumEeumm cOeumESOGOU sou GOeHHHE m.HH co UOmOQ coHuOOOHHOO

.OuOEeumm :OHuQEsmcoo cou coeHHeE mhm.oe co UOmmn soeumooHaen

. OuMEflflmm GOHHQEDmCOU GOH GOHHHHE m . m GO UOmMQ GOHHOOOHHANM
mao.aam.m new.eem.m mem.mmm.e moe.mmm.m eeeweoe eweoe
I I I mem.e ewxese
I I I eem.~ eoecswm
I mme.me eee.mm mee.~m wweeee ewwz ewcwee
I I I moe.e woewee
I I I oea.e aseeewm
emm.m emm.m emm.m ham.~ newewee
aem.~e Nee.a nem.e eem.e weeesewm ewwewewz
mam.ma I I I OOsOmD
www.me eae.me me~.ee I eeweewse
emo.em mos.» eme.e mee.a unweeewzm
emo.em eme.me me~.ee eoa.me weeeeeswz
eme.ee eaa.ae mo~.ee ema.me weewewe eflee
amm.am eem.oe Na~.mm www.moe wweeee nesom
ee~.ae meo.mm moe.me www.moe weeee
mme.ee mme.mm me~.me eae.~e weeeu eo weeeaewe

doweaav

~31~))J

511-15 21) 1364

111

the 1971 Extension represents a simple refinement of the
1965 Act, and not a departure from it.

Chapter VIII analyzes why this basic similarity in
legislation occurred, as well as why there were such great
contrasts in: l) the political processes; 2) Congressional
and public reaction to the Sugar Act; and 3) the major
issues involved in each experience surrounding sugar

legislation.

CHAPTER VIII

1965 AND 1971: AN ANALYSIS

fl
This chapter focuses on why things happened dif-
ferently--or were the same--in the 1965 and 1971 sugar
experiences. Why was there public distress over the Sugar I“

Act and its political process in 1965, and practically none
six years later? What effect did public criticism (or the
lack of it) have on the legislative outcome? Why was the
1971 experience, especially the legislative process, so
smooth, and that of 1965 so chaotic?

Four reasons are offered: 1) Economic conditions;
2) The political processes involved; 3) Foreign policy
considerations; and 4) The political environment in the
United States. In addition to answering the above questions,
all four of these factors help to determine and shape the

relevant issues in sugar policy.

Economic Conditions

Along with shaping the issues in sugar policy, the
economic conditions of sugar, in both the two-year period
preceding each bill and in the year of the bill, shaped the

behavior of the domestic industry.

112

113

1963 and 1964 saw tremendous fluctuations in both
the supply and price of sugar, with a huge surplus--both
domestically and world-wide--and depressed world prices at
the time sugar legislation was being considered. The
marketing of the massive domestic surplus, without produc-
tion cut-backs, was the prime legislative need of the
domestic producing sectors; but Opposition from the cane
refiners, who needed major imports to maintain volume,
set-off the bitter intra-industry conflict, which blocked
sugar legislation for a year. Thus, the key issues were
over an immediate increase in continental production, and
the domestic/foreign share of the market.

Coming off a period of world shortages, the 1965
legislation was formulated from the perspective of insuring
adequate United States supplies in future shortages. Thus
the elimination of the global quota and import recapture
fee--they were made political scapegoats for the economic
conditions of l963-64--became central features of the 1965
legislation. In addition, it was from this viewpoint that
the provision to require foreign suppliers to maintain
larger inventories was included.

The market for sugar was relatively stable as 1971
approached. The mainland cane area was still under produc-
tion controls, and was anxious to increase its quota. It
was able to do so for three reasons. First, the relative

harmony within the industry, a result of no great economic

114

problems and the industry's contentment with the 1965
Extension--plus the fact that they wanted to avoid a repeat
of the brawl that occurred in 1965--enabled good communica-
tion and interaction among the industry sub-sector
associations. The COOperation within the industry was

also a result of the leveling off of United States beet
sugar production. The beet sector did not have to utilize
its political muscle in any great way, although it did
limit the mainland cane expansion to 300,000 tons, since

it was satisfied with the increase it would receive from
normal market growth. Second, the mainland cane sector's
new lobbyist, Horace Godfrey, had strong political ties

to Congress--along with a number of political debts--from
his recent tenure as Director of A.S.C.S. Godfrey provided
the mainland cane sector with political influence they had

1 This is evident

lacked, even with Russell Long, in 1965.
in the relatively large increase in that sector's quota in
1971. He also supplied the influence to obtain the corridor
mechanism as a condition for.the Refiners' proposal to
eliminate quarterly quotas.

The relative economic balance and intra-industry
harmony allowed the industry to concern itself with techni-

cal refinements of sugar policy such as the end of quarterly

quotas and the corridor mechanism.

 

1Interviews with Robert Shields and Horace Godfrey.

115

Since world supply was once again in its normal
surplus state in 1971, minimal attention was paid to deter-
mining whether the Act could adequately deal with future
world shortages, something that the users, in particular,
were concerned with.

The economic situation in 1971 also brought forth
the key issues of what to do with the Puerto Rican deficit,

and expansion of mainland cane production into new areas.

Political Processes

 

In substance, the political processes were not all
that different--Congress, especially, is slow to reform
itself.

In 1965, the Sugar Act itself caused heavy public
concern and was made an issue primarily because of the
attention focused on it by foreign lobbying.' But lobbying
was present again in 1971. The difference, i.e. the reason
for the absence of public criticism in 197l,was Robert Poage.

Harold Cooley enjoyed sugar. Although charges of
improprieties were made against him in 1965, none was pub-
licly proven. According to those intimate with sugar's
political decision process, Cooley played the role he did

primarily for the power.2 His iron-handed hold over sugar

 

2Interviews with industry and government representa-
tives.

116

legislation--in the form of complete Committee control,
delaying the hearings, and personal involvement with foreign
lobbyists and the personal allocation of foreign quotas--was
seen as an expression of his desire for power.

Poage did not share Cooley's fascination with sugar
legislation, and was hardfast in his desire to avoid the
criticism.which had helped to end Cooley's political career.
His role in sugar legislation, described above in Chapter VI,
prompted the following reaction from chief Congressional
sugar critic Paul Findley, who had publicly lambasted
Cooley's role in 1965.

_I wish to compliment Chairman Poage on the policy
changes he has initiated in regard to committee con-
sideration of sugar legislation. . . . These measures
have built public confidence in the legislative process
and have set a good prudent standard for others of us
on the committee.

At Poage's insistence, the domestic industry met early to
formulate a unified position--the intra-industry conflict
in 1965 helped fuel the public criticism that year. The
hearings were held early in the Congressional session and
their sixteen days and the number of witnesses, made them
more extensive than any over which Cooley had presided.

Poage rotated the Chair during the hearings--even

to Findley, who had been silenced by Cooley six years

earlier.

 

3U.S., Congress, House, Committee on Agriculture,
Hearings, 1971, p. 728.

117

All of this clearly miffed Cooley when he returned
as a foreign lobbyist in 1971. He was annoyed that the
Chairman did not afford him special attention, and called
Poage and ranking minority member Page Belcher "hard
headed."4

The contrast in the two Chairmen is also a reason
for the contrast in the 1965 and 1971 House-Senate Con-
ference compromises. Cooley was fighting to save face in
the 1965 Conference; as a result, the Conference report
tended to reflect the House bill. Poage, without public
criticism on his back, was much more willing to compromise
in 197l--there was of course less to compromise over in
197l--and the 1971 Conference Report reflects this.

The 1965 and 1971 experience clearly establish that
the House Agriculture Committee, together with the domestic
industry, is the major force in shaping sugar legislation.
The 1965 House Committee bill withstood the onslaughts of
heavy, at least at first, Senate and Administration opposi-
tion, and public outrage. In 1971, the House Agriculture
Committee bill sailed through both Houses relatively
unscathed.

A second reason for the smoothness in 1971 was the

changed composition of the Senate Finance Committee. Gone

 

4U.S., Congress, Senate, Committee on Finance,
Hearings, 1971, p. 460.

118

from the Senate were John Williams and Paul Douglas, who
had helped lead the battle there in 1965; and in 1971,
William Fulbright chose not to do battle over sugar, attend-
ing none of the Committee's sessions on sugar.

The Administration's changed role is also important
in sorting out the differences in the 1965 and 1971 sugar
experiences. The Johnson Administration had a history of
active participation in agricultural legislation, the Nixon
Administration did not. The contrast was evident in their
approach to general farm legislation, and it clearly
extended to sugar. In both Administrations, however, the
views of the State and Agriculture Departments on sugar
legislation strongly reflected the positions of their
respective clientele groups, and hence, conflicted. Just
as the industry conflict was not as strong in 1971 as 1965,
neither was the Agriculture-State conflict as strong.

The activist role played in 1965--in part due to
the complete breakdown of sugar's traditional policy formu-
lation process--combined with the State Department's
commitments of future quota increases to countries with
good performance records in 1963-64, forced the issue of
1963-64 performance as the criteriOn for foreign quotas.
This commitment by State was at odds with the Agriculture
Department's commitments of an increased domestic allocation
when it urged domestic producers to expand production in

1963. The activist role played by the administration

119

helped to ease those conflicting commitments which were
finally resolved in the important compromise which gave an
immediate quota increase to the beet sugar sector and all
growth in the market up to 10.4 million tons to foreign
suppliers. The Administration shaped many other domestic
aspects of the legislation in 1965.

In not offering its own legislation, delaying intra-
Administration consideration of sugar policy, and with-
holding its testimony until the final day of House hearings,
the Nixon Administration restricted itself primarily to a
defensive role.5

The contrast between Administrations is more than
a matter of style. The.Johnson Administration, at least
in the beginning, desired more than minor change in United
States sugar policy. Although by the time sugar legisla-
tion had come to Conference, that Administration was no
longer willing to use its political clout to support its,
and the Senate's bill.

The Nixon Administration position, through most of
the 1971 experience, was one of general contentment with

6

the United States sugar program since 1965. Part of this

 

5Assistant Secretary of Agriculture Clarence Palmby
did not know the exact Administration position on one issue,
until only a half hour before his testimony as an Adminis-
tration spokesman, according to interviews with industry
representatives.

6Interviews with Tom Murphy and Gary Seevers.

120

contentment, of course, can be attributed to the success--
from the cartel's point of view--of the 1965 Extension.
This is a major reason why the 1965 and 1971 Extensions
were so similar. The 1971 Extension is basically a refine-
ment of the 1965 legislation.

The final consideration in how the political proces-
ses shaped the 1965 and 1971 experience is the changing
role played by the industrial users. They were of little
importance in 1965. That year they tended to be neither
well organized nor particularly interested in the Sugar
Act.7 Their prOposals were formulated by various sugar-
user lobbyists, who had little knowledge of, or concern
for, sugar as a commodity. They did not even meet with
representatives of the domestic industry in 1965. In 1971,
the users for the first time became active members of the
sugar cartel. Executives of the major sugar-using firms
began to feel that the Sugar Act was a strategic piece of
legislation, expecially given their belief that world sugar
shortages were a distinct possibility in the 1970's.8 As
a result they formed a corporate Vice-Presidential level
committee to formulate recommendations for the Act's

extension. Poage and Belcher urged the domestic industry

 

7Interviews with Linwood Tipton, Robert Shields, and
John Bagwell.

8Interview with Linwood Tipton.

121

representatives to meet with the users, which gave the user
recommendations added weight. The users were successful in
pushing through compromises on the guide price and the
corridor mechanism, and earlier deficit declaration and
consumption estimate dates by the Secretary of Agriculture.
It is possible, h0wever, that the users' new-found influ-
ence may not be as great as appears. The domestic indus-
try's willingness to compromise in 1971 might have been a
result of the lack of major economic problems; and of the
industry's fear over payment limitations. For these reasons
the industry wanted to present a united front to Congress,

in hope of avoiding a floor fight of any kind.

Foreign Policy

 

Foreign policy considerations are vital in sugar
legislation. In 1965, the United States policy of foreign
aid and general policies toward less developed countries,
in particular Latin America, were of major importance in
shaping the Act's extension. Although the Administration's
desire to limit developed countries' participation in
market growth was not included, the Extension did give
preference in the growth of the Cuban Reserve to OAS
countries.

As noted earlier, the State Department's 1963-64
commitments forced the issue of 1963-64 performance as the

criterion for foreign quotas.

122

The import fee was embroiled in both economic and
foreign policy debates, but was dropped by the Administra-
tion for foreign policy reasons.

What to do with Cuban Reserve, and how large it
should be, was an issue in both 1965 and 1971.

In 1971, the transfer of part of the Puerto Rican
quota had foreign policy implications, thus the Adminis-
tration's attempt to give preference in market growth to
foreign countries. Foreign affairs at least partially
brought two other major issues--expropriation and the

South African quota--to the forefront in 1971.

Political Environment in the United States

The political environment is responsible at least
partially for differences in the 1965 and 1971 sugar experi-
ences. The concern over the South Africa quota--expressed
only in the Executive Branch in 1965--was 1971's most
heated issue. It was largely a function of the increased
strength of the civil rights movement and the general public
feeling towards South Africa's crudely racist and repressive
domestic policies.

The industry's fear of payment limitations, and
their tax-payment scheme to circumvent limitations, was
based on the belief that this issue--at the time the hottest

in agricultural policy--would be in the political forefront

123

in 1971. To the relief of the industry, it was completely
overshadowed by the South African issue.

Another reflection of the political environment
was the support in 1971 for increased benefits for farm
workers--an issue that had not yet been born, politically,
in 1965.

Finally, the strengthening protectionist sentiment
in Congress in 1971, enabled the passage of import quotas
on confectionaries for the first time, although that indus-

try had urged the adoption of such quotas in 1965.

CHAPTER IX

POLICY AND RESEARCH IMPLICATIONS

This study offers certain implications for public
policy and future research.

First, significant reform in United States sugar
policy is not likely in the foreseeable future. Although
the political processes specific to sugar legislation were
different in 1965 and 1971, the changes made--important in
understanding why certain things happened differently in
the two experiences--had little effect on the legislative
outcome. Thus certain institutional changes will probably
be necessary if reform in the sugar program is desired, as
economic analysis and consumer and taxpayer interests
suggest.

Of primary importance is a strong Consumer movement
which would deal with relatively minor legislation, such as
sugar. It is difficult for consumers to get excited about
so small a budget item as sugar. But as described earlier,
the sugar program costs consumers hundreds of million dollars
annually. In this regard, it is doubtful that the sugar

program is unique. A strong consumer movement, led in the

124

125

sugar battle by critics of the sugar program, could be
formed by coalitions with opponents of other programs to
confront the power of the sugar cartel.

The second set of institutional changes deals with
the Congress. As described in Chapter IV, part of the do-
mestic sugar industry's political power lies in its close
ties with the Congressional Leadership. Although changes
such as elimination of the Seniority System and closed rules,
and open caucus elections of the leadership of both parties
would probably not have an immediate effect on the substance
of sugar legislation, they could have such an impact over
time. Changes specific to sugar policy include the prohi-
bition of foreign lobbyist testimony, and allowing the
Foreign Affairs Committee of each House to handle the foreign
policy aspects of the bill. The first change would eliminate
one of the murkier aspects of sugar's political process,
although there would probably be no change in substance.

The second change, however, could have an immediate effect
on the legislative outcome.

As the study clearly documents, without these in-
stitutional changes, attempts to reform or change the program
in a way unacceptable to the cartel are easily defeated, and
usually limited to begin with.

Second, by itself, public distress over the Sugar
Act and its political process, will not affect reform. This

was clearly proven in 1965.

126

Third, without the institutional changes described
above, active Presidential support is necessary for reform
in the sugar program. Without it, the cartel's political
power--especially its strong influence in the Agriculture
and State Departments--will go unchecked. When it was
given in 1964 and 1965, top Administration support helped
to direct sugar policy toward a less protectionist, more
consumer-oriented program; but with the Presidential elimin-
ation of the import recapture fee, and high level Adminis-
tration abandonment of the Senate bill in Conference, the
chances of limited reform in 1965 died.

Finally, further research in United States sugar
policy should direct itself to more than just the normative
economics of American sugar policy or economic analyses of
the United States sugar program. The literature is full of
such analyses. A two-pronged research approach is neces-
sary. The first is research into what United States sugar
policy ought to be, based not just on economic efficiency-—
economics alone cannot provide the answer to public policy--
but on a comprehensive policy evaluation approach which
would look at the whole program in a broad means-ends frame-
work. Included in this approach would be such things as
distributional impacts and foreign policy considerations--
including whether the price premium truly contributes to
the develOpment process--and how these mesh with general

policy goals. Because the direction of change in the sugar

127'

program might be toward a free market, research must be di-
rected towards the costs of such a shift. Would the benefits
be worth the costs? A new sugar policy could include ad-
justment assistance for economically displaced domestic sugar
growers and workers.

The second research problem is: once what needs to
be done in sugar policy is known, how can it be instituted?
What changes in the political process will be necessary to
affect that policy, and how can those changes he brought
about? This second problem is clearly the more difficult

of the two.

SELECTED BIBLIOGRAPHY

SELECTED BIBLIOGRAPHY

Books & Pamphlets

 

Bates, Thomas H., and Schmitz, Andrew. A Spatial Equilibrium
‘Analysis of the WOrld Sugar Economy. Giannini
Foundation Monograph Number-23. Berkeley, Cali-
fornia: University of California Agricultural
Sciences, May, 1969.

Benedict, Murray R., and Stine, Oscar C. The Agricultural
Commodit APro rams. New York: The Twentieth
Century Fund, 1933.

Campbell, Joe R. Returns, Costs, & Profits for Large Scale
Sugar Cane-Farms inLouisiana, 1§3§ Crop Year.
D.A.E. Research‘Report Number 425. Baton Rouge,
Louisiana: Louisiana State University Agr. Exp.
Sta., May, 1971.

 

. Returns, Costs, and Profits for Raw Su ar Mills
in Louisiana,l969 Grinding Seasgn. D.A. . Research
Report Number 457. Baton Rouge, Louisiana:
Louisiana State University Agricultural Experimental
Station, May 1971.

 

, and Morris, Daniel L. Returns, Costs, and Profits
for Family-Type Sugar Cane Farms in Louisiana, 1969

CroE Year. D.A.E. Research Report Number 424.

Baton Rouge, Louisiana: Louisiana State University

Agriculture Experimental Station, May, 1971.

 

Deutsch, Karl W. Politics and Government. Boston:
Houghton-MIfflin Co., 1970.

Hawaiian Sugar Planters Association. Sugar Manual 1971.
Honolulu, Hawaii: Hawaiian Sugar Planters Associa-
tion, 1971.

Johnson, Harry G. Economic Policies Toward Less Developed
Countries, Washington, D.C.: The Brookings
Institute, 1967

 

 

128

129

United States Beet Sugar Association. ‘The Beet Sugar Story.
Washington, D.C.: United States Beet Sugar Associa-
tion, 1959.

Articles

Bhola, Ranal, and Briemyer, Harold. "Cuba--United States
Sugar Policy and Interim Suppliers' Dilemma."
Business and Government Review, University of
Missouri, date not available., pp. 3-9.

Bonnen, James T. "The Distribution of Benefits From
Selected United States Farm Programs." Rural
Poverty in the United States, A Report by EHe
PresidenETs National Advisory Commission on Rural
Poverty. Washington, D.C.: Government Printing
Office, 1968.

Hamilton, A. "Cotton Candy from Congress." New Republic,
October 9, 1965, pp. 9-10.

Horton, Donald C. "Policy Directions for the United States
Sugar Program." AmeriCan Joyrnal of Agricultural
Economics, May, 1970, pp. 185-196.

 

"Lobbyists: Cloud of Doubt." Newsweek, October 25, 1965,
p. 34.

"Playing Sugar Daddy to Sugar." Life, October 29, 1965,
p. 4.

Shields, R. W. "Sugarbeet Research and the Sugar Act."
American Society of Sugar Beet Technologists'
Journal, (April, 1962), pp. 5-11.

"Sugar Stick-Up." Nation, October ll, 1965, p. 206.

"Sweet Talk: Hearings on Sugar Legislation." Reporter,
September 9, 1965, p. 10.

Washington Post. Editorial, September 20, 1965.

 

Washington Post. Editorial, October 2, 1965.

 

Wall Street Journal. Editorial, November 23, 1965.

Yaggie, R. A., and Lofthard, L. D. "Sugar Beet Production
Costs and Practices in the Red River Valley." North

Dakota Agricultural Experiment Station Bulletin 466,
October, 1966, pp. 1-32.

130

Unpublished Materials

Domestic Beet Sugar Industry, Mainland Cane Sugar Industry,
Hawaiian Sugar Industry, Puerto Rican Sugar
Industry, and the United States Cane Sugar Refiners'
Association. "Industry Sugar Recommendations,"
Press Release, Washington, D.C., March 29, 1965.

Horton, Donald C. "United States Sugar Policies in the
Sixties and Possible Revisions of the United States
Sugar Program for the Seventies." Unpublished
draft, 1970.

Ogg, Clayton. "Income Distribution Consequences of United
States Sugar Policy." Unpublished article, Univer-
sity of Minnesota Department of Agricultural and
Applied Economics.

"Johnson and Johnson on Sugar Policy." Unpub-
lished draft, University of Minnesota Department of
Agricultural and Applied Economics, April 15, 1971.

 

Shields, Robert H. "Consumer Interests--The Basic Issue in
Sugar Legislation." Speech given at the Annual
Convention of National Vendors Association, Miami
Beach, Florida, April 18, 1964.

Government Publications

 

United States Department of Agriculture. The Structure of
the United States Sweetner Industry, by Roy A.
BaIlinger. AgficulturaI Economic Report 213.
Washington, D.C.: Government Printing Office,
September 1971.

United States Department of Agriculture. A History of
Sugar Marketing, by Roy A. Ballinger. Agricultural
Economic Report 197. Washington, D.C.: Government
Printing Office, February 1971.

 

United States Department of Agriculture. Sugar Reports 164.
Agricultural Stabilization and Conservation Service.
Washington, D.C.: Government Printing Office,
January, 1966.

United States Department of Agriculture. Sugar Reports 176.
Agricultural Stabilization and Conservation Service.
Washington, D.C.: Government Printing Office,
January, 1967.

131

United States Department of Agriculture. ‘Sugar Repprts 236.
Agricultural Stabilization and Conservation Service.
Washington, D.C.: Government Printing Office,
January 1972.

United States Department of Agriculture. Sugar Reports 237.
Agricultural Stabilization and Conservation Service.
Washington, D.C.: Government Printing Office,
February, 1972.

Congressional Committee Hearings, Reports,
and Sppplementapy Publications

 

United States Congress. House. Committee on Agriculture.
Hearings. Extend and Amend the Sugar Act, 88th
Congress, Second Session, 1964i

 

 

United States Congress. House. Committee on Agriculture.
Hearin s. Amend and Extend the Sugar Act of 1948,
89tH Congress, First Session, 1965.

United States Congress. House. Committee on Agriculture.
Report on Spgar Act Amendments of 1965. H. Rept.
1646, 89th Congress, First Session, 1965.

 

United States Congress. House. Committee on Agriculture.
The Develppment of Foreign Sugar Quotas in H.R.
11135, 89tH‘Congress, First SESsion, 1965.

United States Congress. Senate. Committee on Finance.
Data Relating to Sugar Act Amendment of 1965, 89th

Congress, First Session, 1965.

United States Congress. Senate. Committee on Finance
Hearings. Sugar, 89th Congress, First Session, 1965.

 

United States Congress. Senate. Committee on Finance.
Report on Sugar Act Amendments of 1965. S. Rept.
909, 89th Congress, First Session, 1965.

United States Congress. Senate. Committee on Finance.
H.R. lll35--Sugar Act Amendments of l965--Comparison
Between House Bill and Senate Amendment, 89th
Congress, First Session, 1965.

United States Congress. House-Senate Conference Committee.
Sugar Act Amendments of 1965 Conference Report.
H. Rept. 1209: 89th Congress, First Session, 1965.

United

United

United

United

United

United

United

United

United

United

United

132

States Congress. House. Committee on Agriculture.
The United States Sugar Program, 9lst Congress,
Second Session, 1970.

States Congress. House. Committee on Agriculture
Hearin 3. Extension of the Sugar Act, 92d. Congress,
First Session, 1971.

States Congress. House. Committee on Agriculture.
Reporp_on Sugar Act Amendments of 1971. H. Rept.
92-245, 92d Congress, First Session, 1971.

States Congress. Senate. Committee on Finance
Hearings. Sugar Act Amendments of 1971, 92d.
Congress, First Session, 1971.

 

States Congress. Senate. Committee on Finance.
Re ort on Sugar Act Amendments of 1971. S. Rept.
- 02, 92d. Congress, First Session, 1971.

States Congress. House-Senate Conference Committee.
Sugar Act Amendments of 1971, Conference Report.
S. Rept. 92-381, 92d. Congress, First Session,
1971.

 

Congressional Debate

 

States Congress, Senate, 8. 2567, 89th Congress,
First Session, October 12 and 13, 1965. Con res-
sional Record, Vol. 111, Part 20, pp. 26727-g6773,
26889-26904.

 

States Congress. House. H.R. 11135, 89th Congress,
First Session, October 19 and 20, 1965. Con res-
sional Record, Vol. 111, Part 20, pp. 27362-g7386,

- , 27506-27528.

States Congress. Senate. S. 2567, 89th Congress,
First Session, October 22, 1965. Con ressional
Record, Vol. 111, Part 21, pp. 28246-28255.

States Congress. House. H.R. 11135, 89th Congress,
First Session, October 22, 1965. Con ressional
Record, Vol. 111, Part 21, pp. 285 - 8563.

States Congress. House. H.R. 8866, 92d. Congress,
First Session, June 9, 1971. Congressional Record,
Vol. 117, No. 87, p. H4884.

133

United States Congress. House. H.R. 8866, 92d. Congress,
First Session, June 16, 1971. Congressional Record,
Vol. 117, No. 88, pp. H4987-5021.

United States Congress. Senate. H.R. 8866, 92d. Congress,
- First Session, July 27, 1971. Congressional Record,
Vol. 117, No. 118, pp. 812231-812285.

United States Congress. Senate. H.R. 8866, 92d. Congress,
First Session, July 28, 1971. Congressional Record,
Vol. 117, No. 119, pp. 812319-812327.

United States Congress. House. H.R. 8866, 92d. Congress,

First Session, October 4, 1971. Congressional
Record, Vol. 117, No. 146, pp. H9092-H9095.

Memoranda

 

Selected Internal Administration Memoranda, 1963-1965.
Memoranda sources include: Bureau of the Budget;
Council of Economic Advisors; Department of Agri-
culture; and White House staff.

United States Cane Sugar Refiners' Association. Settin
the Record Spraight Concerning Sugar Legislation.

Washington, D.C.: United States Cane Sugar Re iners'
Association, August, 1964.

APPENDIX

APPENDIX

The following were interviewed by the author:1
John Bagwell, Hawaiian Sugar Planters Association

Roy Ballinger, Economic Research Service
Department of Agriculture (retired)

James Bonnen, former Senior Economist, Council of Economic
Advisors (1963-1965)

C. H. Devaney, American Farm Bureau Federation
Washington, D.C.

Horace Godfrey, American Sugar Cane League
Irving Hoff, United States Cane Refiners Association
Donald Horton, Economist, Bureau of the Budget (retired)

Charles Krause, Director, Agriculture Branch, Office of
Management and Budget

Tom Murphy, Director, Sugar Division, ASCS

Hyde Murray, Associate Counsel, House Committee on
Agriculture

Don Paarlberg, Director, Agricultural Economics, USDA
Gary Seevers, Senior EconomiSt, Council of Economic Advisors
Robert Shields, United States Beet Sugar Association

Linwood Tipton, International Association of Ice Cream
Manufacturers

Ray Voelkel, Economist, Office of Management and Budget

 

1All were interviewed in Washington, D.C., on April 5,
6,7,10, or 11, 1972, with the following exceptions: James
Bonnen, East Lansing, Michigan, November, 1971-June, 1972;
Donald Horton, Dekalb, Illinois, March 31, 1972; and Gary
Seevers, East Lansing, Michigan, February 24, 1972.

134

HICHIGRN STATE UNIV. LIBRRRIES

 

31293103153676