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American sugar growers are high on subsidies
THE UNITED STATES and Australia have announced a new trade agreement that opens the flow of commerce between the two allies, with a few exceptions--notably sugar, which will remain protected by U.S. quotas and tariffs. What a sweet deal.
Sugar, in fact, almost queered the negotiations, with the Aussies demanding the United States accept more of their product, a move that would have lowered prices for U.S. consumers. But American negotiators held firm; the commodity will remain protected. Which raises the question: Why do sugar producers get such a treat from Uncle Sam?
Agricultural subsidies began during the Great Depression as an effort to protect the family farm during those seriously hard times, but they continue today, when most agriculture is a corporate enterprise. Few continuing supports make less sense than the sugar subsidy. The government, through tariffs on imported sugar and various programs like non-recourse loans to growers (i.e., loans that can be "repaid" in unsold sugar), has essentially set the price of sugar since 1981 at about twice what the rest of the world pays. The results? Higher costs to Americans. Lost jobs. Environmental damage. Forfeited economic opportunities for Third World countries.
In 2000, the General Accounting Office reported that sugar subsidies nicked American consumers almost $2 billion per year in increased prices alone. The artificially high cost of domestic sugar forces food producers--like soft-drink companies and candy makers--to either jack up the cost of their own products, leave the country, or turn to an alternative source of sweetening. That's why soft drinks like Coca-Cola use high-fructose corn syrup instead of sugar and why Kraft moved its Life Savers production to Canada. Chicago, home to many candy makers, has seen a 50 percent decline in that industry's jobs over 30 years mainly because of sugar subsidies.
But increased prices and closed factories are not the only ways John Q. Public takes a hit. Government subsidies encourage the overproduction of domestic sugar and sugar beets. Then, to keep prices high in a flooded market, the U.S. Department of Agriculture buys up the excess. The tab to the taxpayer, calculates the Cato Institute, is a hefty $1.68 billion a year just to buy and store the surplus. Think American society could find better uses for that wad?
To the insult of sugar subsidies, add the injury of damage to Mother Nature. Florida is a major sugar-producing state. The pumped-up profitability of the product encourages growers to drain large parts of the Everglades, causing loss of habitat and harm to Florida fisheries and the shrimp industry. To repair the damage, taxpayers, once again, get to pick up the bill: some $11 billion for the Comprehensive Everglades Restoration Plan.
Moreover, the sugar-subsidy program freezes Third World countries out of a lucrative market. If the U.S. market were freed up, developing nations would see an increase in annual export earnings of about $1.5 billion. How about foreign aid through fairness?
The federal sugar program is a clear example of government market meddling. If the barriers were down and the subsidies axed, supply-and-demand would kick in, lowering prices. Instead, the powerful U.S. sugar lobby--which has sprinkled more than $18 million into the campaigns of both Democrats and Republicans since 1990--has discovered political Washington's sweet tooth. The new American-Aussie trade pact is just the latest example of the rot.
