Dominican Republic Signs Soviet Deal : Sugar Quotas Come Under Scrutiny

The Dominican Republic, almost squeezed out of the U.S. sugar market by ever-tighter quota limits, has signed a three-year contract to sell sugar directly to the Soviet Union for the first time.

The agreement comes as the Reagan Administration is preparing to ask Congress to overhaul the sugar quota system on grounds it is hurting U.S. consumers, damaging allies--including the Dominican Republic and the Philippines--and crippling U.S. foreign policy in the Caribbean.

“To the extent the Dominicans come to rely on the Soviets rather than us to dispose of this sugar, there should be some concern,” said John Nuttall, head of the Agriculture Department’s sugar group.

Under the February agreement, the Dominican Republic, formerly the largest U.S. supplier of sugar, will sell Moscow 50,000 short tons of sugar per year at 8 cents per pound, which is at or slightly above the current depressed world-market price. The yearly shipment equals about one-third of the island nation’s 1987 U.S. quota of 160,150 tons, which is worth about $60 million at the protected U.S. sugar price of 22 cents per pound.

A Dominican Embassy spokesman said the Soviet sale had nothing to do with politics. “We have an overflow of sugar in our market, and we have to sell it,” he said. “We are planning to sell sugar to whoever wants to buy it.”

Cuba has traditionally supplied about three-quarters of the Soviet Union’s annual 5 million metric tons of imported sugar and received as much as 50 cents per pound for it, but Cuba has not been able to produce enough sugar to meet that demand for several years. The Soviets began buying Dominican and other Caribbean nations’ sugar on the world market in 1982, just after the United States imposed quotas at the insistence of domestic sugar growers.

Nuttall said Soviet purchases of Dominican sugar have averaged about 200,000 tons per year since then, but those were made through brokers who surveyed the world’s available sugar for the best price at the time of the order.

The new contract establishes a direct, guaranteed sale for the first time.

“There are certainly good, sound trade reasons for it, but you can’t help think the Soviets had alternatives,” Nuttall said. They buy white refined beet sugar from Romania and Hungary, and unrefined cane sugar from Brazil, Argentina, Australia and many other nations, he said.

Richard N. Holwill, deputy assistant secretary of state for the Caribbean, said Soviet interest in Dominican sugar is not new. “This is consistent with the pattern of previous years. It’s not of major concern to us at this time,” he said.

Nevertheless, the Administration is expected to send Congress soon, possibly this week, legislation that would reduce the subsidy to U.S. sugar growers from 18 cents to 12 cents per pound and end the key provision justifying quotas: that the program be cost-free to the U.S. government.

According to a Feb. 24 speech by Douglas W. McMinn, assistant secretary of state for economic and business affairs, the impact on domestic producers would be cushioned with limited direct payments, phased out over five years.

“The need to reform government sugar policy is acute,” he said. In an interview, McMinn said the program would not end quotas but “allow greater flexibility” in setting them.

David C. Carter, president of the U.S. Beet Sugar Assn., said the Administration approach “doesn’t wash. They say if we don’t buy (Caribbean) sugar they’re going communist, but we were buying all our sugar from Cuba when Fidel (Castro) took over.” The new legislation, he said, will be “a plan to do away with the domestic industry, but it won’t solve anything. The problem is that we don’t need so much sucrose any more.”

The Dominican Republic’s sales to the United States have plummeted from $333 million in 1985--one-third of its total earnings--to an expected $61 million this year, according to Commerce Department figures. U.S. foreign aid to the republic was also slashed by 40% this year, to $140 million.