From the Washington Post editorial “Congress needs to roll back subsidies to sugar producers“:
Federal policy coddles the U.S. sugar industry through import controls, soft loans and price targets. The result is higher consumer prices — and fewer jobs in the U.S. food industry. Still, for many years Big Sugar and its defenders could claim that the program was designed to avoid any direct expenditure of taxpayer funds and that it had, in fact, achieved that goal.
Not anymore. The Agriculture Department lost $280 million on the sugar program in fiscal year 2013, with more losses expected next year. A surge of imports from Mexico has driven down U.S. sugar prices — to the point where it’s profitable for processors to take advantage of a U.S. law that lets them forfeit the sugar they posted as collateral for government loans and keep the cash. Stuck with mountains of excess sweetener, the government has two choices: hoard it until prices go up or sell it at a huge loss to the few ethanol makers willing to take it.
Even before this latest evidence of the sugar program’s irrationality, bipartisan critics in Congress had been trying to add reforms to the next five-year farm bill, which Congress is still debating. They failed.
Big Sugar argues that ending U.S. sugar protections would be unilateral disarmament, since Mexico subsidizes its industry, primarily through state ownership of one-fifth of the country’s sugar mills. That didn’t matter much as long as Mexico had to compete with other sugar exporters for an allotted quota of the U.S. market. But five years ago a provision of NAFTA took effect, allowing unlimited imports from Mexico. Now, the sugar lobby says, the United States should adopt a “zero-for-zero” policy: We’ll stop fiddling with the sugar market when everyone else in the world does the same.
It sounds reasonable. Indeed, though the world sugar trade has liberalized in recent years, about a tenth of it is still subject to bilateral agreements and preferential arrangements. Economics 101 says everyone would be better off if these controls were abolished.
Alas, Politics 101 says that’s not going to happen soon, so demanding “zero-for-zero” amounts to an excuse for perpetuating policies that benefit U.S. producers at the expense of food processors and consumers. The U.S. sugar industry has known since NAFTA’s ratification in 1993 that Mexican imports were coming; it could have used the time preparing to compete instead of lobbying for protection.
The United States should stand for free trade in sugar and against protectionism. Setting a better example would help.
MP: Might be a good time to quote Frederic Bastiat, who sent this message to a friend four days before the noted, free-market French economist died in 1850: “Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race.”
Anti-consumer, protectionist US sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff on foreign sugar, and is a perfect illustration of trade protection that ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers. US sugar policy violates the interests of consumers, and by doing so, violates the interests of the human race, in favor of a politically favored special interest group – “Big Sugar.” Kudos to the Washington Post for speaking up on behalf of the hundreds of millions of US consumers who pay about $3 billion in higher prices every year to Big Sugar because of the ongoing government-sanctioned protection that industry receives from more efficient foreign rivals.