THE SUGAR PRICE support system is one of the least defensible items in the federal candy store, a program in which several billion dollars a year are plucked by fiat from a large group of losers -- U.S. consumers -- for a small group of domestic producers. The mechanism has foreign policy implications as well; its net effect has probably been to squeeze the economies of Third World producing countries, including some in Latin America and the Caribbean Basin thought vital to U.S. interests. The program was put in place four years ago, over administration objections, by power of a kind that has characterized sugar politics in Congress for 50 years. There is now an opportunity to roll the program back, as part of the pending farm bill. We hope it will succeed.
The sugar support system was set up in the farm bill of 1981, which is now expiring. The lore was that the administration dropped its opposition in return for the votes of sugar-state congressmen for its budget bill that year. "I went with the best deal," Rep. John Breaux of Louisiana, one of 29 Democrats to side with the administration on a key vote, was quoted as saying at the time. No, he went on to explain in one of the better moments of the 97th Congress, that did not mean his vote was for sale, but "it can be rented."
The program works like those for other supported commodities, through loan rates -- guaranteed amounts for which producers can park their products with the government if market prices are too low. This loan rate for domestic sugar is now about 18 cents a pound. The world price is about a nickel. U.S. users could thus be expected to buy on the world market, and leave the government to buy up domestic production. To keep the government from having to do that, there is a second part to the program: the government has the power to set import quotas. Only enough foreign sugar is supposed to be let in to fill U.S. needs, after all U.S. sugar has already been bought.
Most years the program has worked out exactly that way. The legislated price has all been passed on to consumers, and sugar has not shown up as a budget item. This year for the first time the government will buy some -- over 400,000 tons at a cost of around $200 million; domestic production plus allowed imports exceeded demand. Next year it may have to buy some more; apparently in response to pleas from hurting Caribbean Basin countries, quotas were not cut as they should have been to hold the government harmless.
The House and Senate farm bills would preserve this loan-and-quota system. Their one concession would be to freeze the loan rate at next year's expected 18 cents; it would then erode with inflation. Critics are at work on amendments that would take the rate down a penny a year instead. That is the least Congress should do. There are about 3,000 sugar cane farms in this country (mostly in Florida, Louisiana and Hawaii) and 6,000 sugar beet producers (mostly in California and the Midwest). The corn industry also benefits from the system: corn sweeteners now have half the U.S. market, and the higher the price of sugar, the higher the price of sweeteners can also be. Spokesmen for these beneficiaries make impressive arguments in behalf of their protected market. One is a trade argument: that sugar is entitled to at least as much protection as shoes and textiles, both objects of sympathy just now in Congress. On this we agree with the sugar people. We don't think the shoe and textile industries should be protected, either. If something doesn't cost much, why not leave it be?