America’s long-standing protectionist farm policies protect inefficient domestic sugar beet growers from more efficient foreign competition, which have driven up average wholesale sugar prices in the US to twice the world price: 29 cents per pound on average in the US vs. 14.6 cents in the world market since 1982 (see chart above, data here). And as a result, US manufacturers of products with high sugar content have increasingly moved their production overseas to avoid America’s artificially high sugar prices and take advantage of the lower world price for their main input.
Predictably, our protectionist trade and agricultural policies reap generous benefits on one very small special interest group – US sugar beet farmers – but that comes at a dear price – the loss of thousands of US jobs in sugar-using industries, higher sugar prices for hundreds of millions of Americans, and the loss of thousands of jobs in unseen industries that would have prospered if consumers hadn’t spent so much of their income on artificially high prices for sugar-containing products.
For example, an article on the front page of the WSJ today reports that “Cheaper Sugar Sends Candy Makers Abroad“:
Despite a prolonged slide in domestic sugar prices, U.S. candy makers are expanding production in other countries as federal price supports and a global glut of the sweet stuff give an ever-greater advantage to foreign rivals. A 50% drop in U.S. sugar prices in the last two years hasn’t been enough to eliminate problems from a longtime price gap between domestic and foreign sugar. On Friday, the U.S. sugar contract in the futures market settled at 22.28 cents a pound, or 14% higher than the benchmark global price.
U.S. prices can’t fall much lower because of a federal government program that guarantees sugar processors a minimum price. The rest of the world also has a surfeit of sugar, but fewer price restrictions, and big growers like Brazil are expecting a record crop for the current season.
The squeeze explains why Atkinson Candy Co. has moved 80% of its peppermint candy production to a factory in Guatemala that opened in 2010. That means it can sell bite-size Mint Twists to retailers for 10% to 20% less. “It wasn’t like we did it for profit reasons. We did it for survival reasons,” said Eric Atkinson, president of the family-owned candy maker, based in Lufkin, Texas. “These are 60 jobs down there…that could be in the U.S.,” he added. “It’s a damn shame.”
MP: This example also helps illustrate a point made by Don Boudreaux recently about the
minimum wage law unfair government practice of forcing many unskilled and low-skilled workers to remain unemployed, as I reported on CD, and summarize again here using the sugar example above.
Most people, even proponents of the
minimum wage unfair government practice of forcing many unskilled and low-skilled workers to remain unemployed, readily understand that profit-seeking American firms producing candy and other products with high sugar content, whose main cost of production is sugar, will seek to minimize their cost of production, which frequently involves moving or outsourcing the production of candy to other countries where sugar costs are lower than in America. But then some of those same people suddenly suffer from “economic amnesia” and assume those same profit-seeking firms become suddenly completely indifferent to the costs of labor in America, and make no adjustments when faced with an increase in the minimum wage unfair government practice of forcing many unskilled and low-skilled workers to remain unemployed?