End the import quotas on sugar

Workers shred sugar cane near Lake Okeechobee in an industry aided by import quotas.

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Workers shred sugar cane near Lake Okeechobee in an industry aided by import quotas.

For years, domestic sugar producers have profited from quotas limiting sugar imports, boosting prices to American users.

Such protectionism takes from American consumers for politically powerful sugar producers. And it is an issue now that the difference between American prices (35.02 cents per pound) and world prices (19.67 cents per pound) has reached its highest level in over a decade.

Food manufacturers have asked both Congress and the Department of Agriculture to ease the quotas (backed with a 15.36 cents per pound tariff on shipments beyond quota allowances) on behalf of sugar consumers and food manufacturing jobs. As usual, the sugar producers' lobby (including "Big Sugar" members Florida Crystals and U.S. Sugar Corp.) are responding with misleading arguments to defend its protection (aptly characterized by William Graham Sumner's description that "A wants protection; that is, he wants B's money. … A talks sentiment and metaphysics finely, and, after all, all there is in it is that he wants B's money").

Though supply restrictions have left America with its lowest sugar stocks in the 21st century, the producers' American Sugar Alliance has defended its protectionism by misdirecting the argument to the absence of a sugar shortage, which is correct but irrelevant. Shortages occur only when government holds prices below market levels. But import quotas artificially restrict supply, which increases prices.

Quotas effectively impose a steep sugar tax on consumers, with the proceeds paid to domestic producers. One result? The makers of Life Savers, Red Hots, Jaw Breakers and other candies have shifted production elsewhere in response.

Similarly, Big Sugar has attacked food processors' efforts to ease quotas as merely an attempt to boost their profits. But attacking processors' profit motives, though not their own in opposing import increases, shifts the debate away from the central fact that by far the biggest winners from lowered prices would be consumers.

Big Sugar's latest efforts build on a long line of misrepresentations. For example, when protectionism generates higher prices, so that the government won't buy up sugar to boost prices, they trumpet savings to taxpayers but ignore the massive costs of the higher prices to consumers.

But perhaps Big Sugar's most infamous misrepresentation has been its argument that, because sugar producers are assessed to pay the costs of administering the quota program, it imposes no costs on others. That claim ignores the higher costs inflated sugar prices impose on consumers, which dwarfs the administrative costs of running the program.

Producer financing of the sugar quota program has the same effect as allowing domestic sugar producers to privately hire privateers to blockade our ports against ships carrying sugar to America. Both restrict available supplies, raising sugar prices. As economist Henry George observed long ago, such protectionist policies "are as much applications of force as are blockading squadrons, and their object is the same — to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; (protectionism) to prevent their own people from trading. What protection teaches us is to do to ourselves in time of peace what enemies seek to do to us in time of war."

America's sugar protectionism has never been anything but a concentrated interest group — sugar producers (plus the corn and corn products industries, since higher sugar prices raise the demand for corn syrup) — using government power to keep out lower cost foreign producers and rip off American consumers on their behalf. It is a sweet deal for them only because it is such a sour deal for the rest of us.

It is long past time that Americans thought more carefully about it, to see through the sugar lobby's flimsy smokescreens, and demand an end to this inefficient, inequitable and regressive program. Then we should turn our eyes to the many other protectionist policies we maintain to reward other powerful interest groups at our expense.

Gary M. Galles is a professor of economics at Pepperdine University in California.

End the import quotas on sugar 03/22/10 [Last modified: Monday, March 22, 2010 10:40pm]

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