Monday, March 22, 2010;
FOR BETTER or worse, sugar is one of the most pervasive ingredients in the American food supply. When its price spikes, as it has recently, costs go up for food processors and grocery bills go up for consumers. Recent fluctuations in the price of sugar somewhat reflect supply disruptions in countries such as India and Brazil. And if sugar were getting more expensive because of the free play of supply and demand, our advice would be to grin and bear it -- or maybe cut down on snacks and sodas.
But the price of sugar does not only reflect market forces. In fact, wasteful government policies are deeply implicated in the latest surge.
In 1982, U.S. sugar cane and sugar beet farmers successfully lobbied Congress for a government-guaranteed share of the market to stymie competition from producers in the developing world. Today, that share is up to 85 percent; the rest gets divided (unevenly) among some 40 lucky countries, plus Mexico, which recently started exporting here under the North American Free Trade Agreement. The government also guarantees minimum prices for both raw cane sugar and refined beet sugar. The combined effect of these measures has been to keep the U.S. price well above the world price. The differential recently hit an all-time high: about 35 cents per pound in the United States vs. about 20 cents everywhere else. It's tantamount to a 15-cent tax on every pound -- except the money doesn't go into public coffers.
To be sure, the policy preserves jobs and profits on U.S. sugar farms. But everyone else pays, and not only at the checkout counter. U.S. candymakers and other food processors shed 70,000 jobs between 1997 and 2004. In 2006, the Commerce Department estimated that the sugar program cost three confectionery manufacturing jobs for each job it saved in sugar growing and harvesting.
U.S. food processors want Agriculture Secretary Tom Vilsack to use his authority to increase imports by 180,000 tons. It tells you something about the irrationality of sugar policy that Mr. Vilsack could do this by reallocating quotas from countries, such as Haiti and Jamaica, which still have the right to export sugar to the United States, even though they haven't exercised it for years. At best, though, this is a short-term fix. Sugar protectionism is a burden on consumers and a job-killer. It's time to abolish it once and for all.