CBO: Sugar Farms the Losers in CAFTA

The Bush administration's free-trade agreement with Central America would cost taxpayers $50 million a year in loan forfeitures by sugar farmers, the Congressional Budget Office (search) says.

An administration official said Thursday that the analysis was unrealistic and that there would be virtually no cost under sugar provisions in the deal.

The CBO released its estimate as House leaders planned for a vote next week on the Central America Free Trade Agreement (search). It would remove or lower trade barriers with Costa Rica, El Salvador, Guatemala, Honduras, Nicar Republic.

Overall, CAFTA would cost the U.S. about $4.4 billion over the next 10 years, primarily in lost tariffs, the CBO said.

Under CAFTA, those countries could ship more sugar to the United States. The CBO said the influx would push prices down and force farmers to forfeit government loans on their crops, costing taxpayers on average about $50 million annually through 2015.

"Not only would CAFTA threaten the livelihoods of thousands of U.S. sugar farmers and workers, but now we have proof that it's a bad deal for taxpayers and would be a revenue loser, too," said Republican Rep. Mike Simpson of Idaho, a state where sugar beets are grown.

Wariness from sugar farmers has generated fierce opposition on Capitol Hill, although a broad array of other farm groups support the deal. The Senate endorsed CAFTA last month on a 54-45 vote.

An administration official said it's impossible to forecast the cost beyond 2007, because that's when Congress is due to overhaul farm programs, including the sugar program.

"Our analysis suggests to us there would be no cost in 2006 and virtually no cost in 2007," said J.B. Penn, undersecretary for the Agriculture Department's Farm and Foreign Agricultural Services. "We can't go beyond this farm bill. We can only make a commitment for those things we control."

In a concession from the White House, Agriculture Secretary Mike Johanns (search) has promised to use his authority to keep excess Central American sugar off the U.S. market.

Johanns can buy excess sugar from CAFTA countries to use for things other than food, such as sugar-based ethanol fuel (search). He can also give away other U.S. crops to CAFTA countries that agree not to ship sugar to the United States.