La. port, sugar interests split over CAFTA

Forty miles of cypress-pocked marsh separate competing ways of life in Louisiana, one tied to America's biggest port system and the other to a $2.7 billion sugar industry. Across that divide, the state has ruptured over whether to support the U.S.-Central American Free Trade Agreement.

The port of New Orleans is lined up behind CAFTA, which would end duties on $33.4 billion in goods traded by the United States with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras and Nicaragua. In Louisiana's sprawling sugar plantations, farmers fret about CAFTA ending import quotas, devastating what has been the backbone of their rural economy for two centuries.


The trade agreement has been stalled in Congress for more than a year, largely because of opposition from sugar growers. The accord had its first official hearing in the Senate on Wednesday, and a full congressional vote is expected within two months. President Bush's chances of gaining approval may hinge on how many of Louisiana's nine congressional lawmakers he can win over.

The sugar issue "could be decisive for CAFTA," says Gary Hufbauer, a senior fellow specializing in trade at the Institute for International Economics in Washington. "The reason the Louisiana votes are so powerful right now is that the vote is so close. Counting the sugar lobby against it, with Louisiana's votes, President Bush doesn't have the votes to pass it."


So far, only one member of the state's congressional delegation - which is made up of five Republicans and four Democrats - has publicly announced support for CAFTA. Sen. Mary L. Landrieu, a Democrat, says she won't support CAFTA "if it includes the current sugar provisions," and Republican Rep. Bobby Jindal has broken ranks with the administration. "I'm very much in favor of trade," says Jindal, who represents suburban New Orleans. "But the most important thing is to protect our sugar industry. Without that I can't be for CAFTA."

That sentiment isn't lost on Gary LaGrange, executive director of the port of New Orleans. "This is a romantic state, and CAFTA is a hugely emotional issue," says LaGrange, who is also heir to a 350-acre sugar farm. "I've been convinced of the benefits of CAFTA, but that's easy for me to say. I'm just a gentleman farmer."

Until CAFTA came along, Louisiana's lawmakers had been reliable supporters of Bush's trade policies, with both senators and six out of seven of the state's representatives voting for each of the last four trade accords that came before Congress.

"We've been talking to our delegation, and I think we got most of them," says Jackie Theriot, general manager of Louisiana Sugarcane Cooperative Inc. in St. Martinville, which opposes CAFTA. "When they see that farmer sitting in their office, they pay attention."

Sugar has been at the heart of Louisiana's economy since 1795, when French nobleman Etienne de Bore made sugar cane a profitable enterprise.

Louisiana produced 1.6 million tons of sugar in 2003, the second-most in the United States behind Florida, with a value of $548 million. As the state's most profitable crop by a factor of three, sugar contributes $2.7 billion a year to the $140 billion state economy, the industry estimates.

Quotas and guarantees

That profit relies on a system of import quotas and government-guaranteed loans of 18 cents a pound for raw cane sugar. The net impact is that sugar prices in the United States averaged 21 cents a pound in 2004, compared with 8.5 cents on the world market.


CAFTA would phase in, over 15 years, a 50 percent increase, or 153,000 tons, of sugar a year from five Central American nations. That would more than double exports to the United States from the five nations and cut one-half cent from the price of sugar, according to Michael Salassi, an economist at Louisiana State University in Baton Rouge.

Early on, the Bush administration recognized the critical role the sugar issue would play in determining the accord's fate. Just three days after the agreement was reached in 2003, then-U.S. Trade Representative Robert Zoellick traveled to New Orleans to tour the port and address business leaders.

After Zoellick spoke, Charles Melancon, then the general manager of the American Sugar Cane League in Thibodaux and now a freshman Democratic congressman, asked Zoellick if he would come outside to meet representatives of sugar farmers and workers opposed to the deal. Zoellick, Melancon says, angrily refused and suggested Melancon meet with longshoremen at the port who favor the deal.

Asked about Melancon's account of the meeting, Neena Moorjani, a U.S. trade office spokeswoman, said that "the congressman disagreed with the fact sugar was handled with care, and that CAFTA will not undermine the U.S. sugar program." She declined to elaborate, and phone and e-mail messages to the State Department, where Zoellick is now deputy secretary, weren't returned.

Melancon made defeating CAFTA the centerpiece of his run for Congress last year. "I will be opposed to any bilateral trade agreements that will hurt or destroy an industry," he says.

Helping back him up is the political weight of the sugar industry, which donated $2.4 million to candidates in the 2004 election, and spent $3.2 million on lobbying last year. Among the industry's most prominent givers for years has been the Fanjul family, which controls large portions of Florida's sugar cane production as well as Domino Sugar, which has a production plant in Baltimore's harbor.


More exports

Matt Niemeyer, the U.S. trade representative's congressional liaison, said the trade office is still working to meet with Louisiana lawmakers to "allay their fears" about the accord. "We believe it doesn't hurt the livelihood of the Louisiana sugar industry," he said.

The port of New Orleans, supporting Bush, points to a study it commissioned that estimates CAFTA could lead to $164 million in new exports from Louisiana. Louisiana had $1.2 billion of exports to the six CAFTA nations in 2004, making it the fourth-largest exporting state to the region after Florida, Texas and North Carolina.

The New Orleans port would see as much as $40 million a year in new volume, according to a study by James Richardson, a Louisiana State economist.

Backing the port are such companies as shipper Seaboard Corp. and apparel maker Warnaco Group Inc. Those companies along with Johnson & Johnson, Intel Corp., Procter & Gamble Co. and about 90 other U.S. corporations sent a letter to Congress last year urging passage. They noted potential benefits including the ability to sell more products in Central America, access to lower-priced commodities and the strengthening of laws protecting U.S. investments in the region.

Warnaco and other apparel makers also say that getting CAFTA through Congress is the key to making Central America competitive with China as a source for clothing.


"CAFTA is the key to the region surviving," said Ralph Iannazzone, senior vice president for global sourcing at Warnaco. "Apparel is what feeds industry in those nations."

"This is going to come down to one or two votes," says John Hyatt, vice president of Irwin Brown Co., a New Orleans-based customs broker and leader of the state's pro-CAFTA lobbyists. "Hopefully, the Louisiana delegation doesn't bring this down."