CAFTA and Sugar Beets - it's complicated

A long time ago, in a galaxy far, far away - wait - that's a different story.  This piece is about sugar beets and CAFTA - it's economics and fairly complicated, but it does demonstrate one of my basic life principles - "We are all in this together".  Thank you, Red Green.  It's about how the sugar market works between here and Central America.  Or, who is paying whom for what.
(I am going to the Red Green show here in Minnesota in May, thank you very much, my lovely wife.)

I suspect you use some sugar, one way or another.  It turns out that you and I and all U.S. consumers are paying about $1 billion more for our sugar each year to help out domestic sugar beet farmers.  And by that investment, we are preventing about 140 new jobs in Central America, and potentially many others in other parts of the planet. It's like reverse foreign aid or something. How does that work exactly?

A long time ago, years, literally, I was in Nicaragua, and an economist there was explaining CAFTA, the Central American Free Trade Act.  He  gave us an inside look at how this would affect Nicaragua.  He was agin it!  The conservatives here, the classical Free Trade people, were all in favor of this because it lowers barriers to trade.  Trade is good.  The U.S. sells a bunch of stuff in Central America - appliances, electronics, and food!  If you shop in the market in Managua, the rice and corn from the U.S. is cheaper than the local product.  Technically, that's a good thing.  It lowers the cost of living for anyone that depends on rice and corn to live - which includes most Nicaraguans.  However, in this case, it also affects the Nicaraguan farmer, because it depresses the price of their product.  And since most farmers there are doing it basically by hand, their productivity is not wonderful, and they are stressed to earn a living with all of this international competition. They also represent about 30% of the population, versus less than 1% here.

My economist friend looked at all of Nicaragua's exports, and the only one that would be significantly benefited by the free trade act was sugar.  He figured that Nicaragua could produce and ship more sugar to the United States at a competitive price, and thus create more jobs.  He guessed it would generate about 140 new jobs in all of Central America.  Of course, the U.S. sugar industry, mostly sugar beets, also realized this.  So they lobbied Congress hard to put in place a sugar price support.  Whatever happened to free trade?  OH, I'm sorry, it's NOT a tariff - that would be illegal.  It's a "price support".  Oh, and that is basically FREE, that is it does not cost the government of the U.S. anything - just the consumers of the U.S.

You can read about it here in the Star and Trib for March 11, 2012.  Star and Trib article 

So, to enhance free trade, and benefit all, we don't mind damaging the farmers in Nicaragua, but we will not damage the farmers in the U.S.  The consumers in both countries are paying for this directly, without the overhead of government collecting and paying out taxes.

Does not seem fair to me.  We have a lot of price support programs exactly like this  We, you and I, through our federal taxes, pay some farmers a price floor, which, in effect, drives down world food prices - thus benefiting consumers around the world, and damaging farmers around the world..  See this article on all of that:  Wikipedia on Farm Subsidies.

You and I, my friend, are paying $20 Billion a year to subsidize the most productive farmers in the world.  We started these payments back during the depression, when the U.S. farmers were seriously hurt by falling prices.  That was a LONG time ago, in another galaxy.  And most of that money is not going to the small, family farm, but to the large, industrialized operation.

I must be missing something here.  Why are we doing all this?  Because of the agricultural lobby?  Is agriculture a major defense industry now, that we all are paying billions to protect it from foreign competition?

So you see how this works.  We are all in this together.  You and I are paying both sides of this one.  Our taxes hold up the prices which raise the price of our food.  I don't think it's a win / win, here or in Nicaragua.

If you have any insight into this, I would appreciate being enlightened about it.  Thanks. I've asked our fearless elected leaders about this one.  I'll let you know what they respond.  My cursory searches on Google failed to turn up any one that would actually defend this policy.  There must be someone that can explain this.