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 the North American Free Trade Agreement (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. In any case, the state share of the Mexican sugar industry is much smaller than it was a decade ago; the government is trying to privatize the rest, so this supposedly nefarious Mexican subsidy is likely to be even smaller in the near future.
The United States should stand for free trade in sugar and against protectionism. Setting a better example would help.
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