Don’t Unilaterally Disarm
January 25, 2012
In case you missed it, the Grand Forks Herald editorialized today that no-cost U.S. sugar policy is necessary as long as the global dump market remains grossly distorted by heavily subsidized foreign producers.
U.S. sugar policy operates differently than most others around the world. There are no subsidy checks, so there is no government cost. It helped America avoid sugar shortages that have hit other countries. U.S. sugar prices remain so affordable that restaurants give it away for free. And even the policy’s biggest opponents—candy companies—have increased production and seen record profits since the policy became law in 2008. No wonder Congress is being urged to maintain this no-cost policy in the upcoming Farm Bill.
Grand Forks Herald
“The sugar program interferes with the free market.” “Yes, but it does so at no cost to the U.S. government.”
“Yes, but the government’s import quotas raise sugar prices for consumers.”
Like tennis players trading shots across the net, supporters and opponents of the federal sugar program lob arguments back and forth.
But this next argument by supporters always and rightly wins the day:
“Yes, but the quotas are a response to the sugar subsides in other countries.”
That’s the key issue — the root of the American sugar program, and its real reason for being:
There’s no such thing as a free-market price for sugar. There’s only the world price — a price that’s distorted by the fact that “around the world, sugar is one of the most heavily subsidized industries,” as wikinvest.com notes.
Those subsidies are so rich and widespread that “the primary driver of sugar prices is government regulation,” the website declares.
That’s the environment in which the U.S. sugar program must be judged. And that’s the reason why the supporters’ claims of stable consumer prices, a profitable domestic industry and — unlike other sugar-growing countries — no government subsidies have stood the test of time.
The sugar program is back in the news because Republican candidates Mitt Romney and Newt Gingrich both promised to eliminate it. But they almost certainly would not do so because of the reason mentioned above.
After all, not even the freest of free-market economists calls for unilateral disarmament in American trade.
When President Bill Clinton signed the North American Free Trade Agreement in 1993, it marked the start of a bipartisan consensus in favor of free trade — a consensus that continues to this day. But remember: NAFTA lowered trade barriers between the U.S., Canada and Mexico as part of an agreement, not independent action.
All three countries — not just one — had to agree to end their protectionist policies. Because unless their barriers came down in tandem, then the country that had kept its barriers intact would have profited at the others’ expense.
That’s exactly what would happen if the United States unilaterally eliminated its sugar program.
Today, sugar subsidies overseas are such that American sugar is priced 11 percent lower than the average price paid in other developed countries, the American Sugar Alliance notes. Thanks to what The New York Times has called “the sprawling European subsidy program,” sugar prices across the European Union are 30 percent higher than in the U.S.
There’s a word for what happens when one country floods another with a subsidized product. The word is dumping — and why would the U.S. want to welcome container ships full of dumped sugar?
Through its sugar program, the U.S. government “provides market supply/demand balance and rigorous anti-dumping protection at our borders — rightly preventing subsidized foreign producers from gaining control of American sugar markets and shipping even more American jobs and industries overseas.”
That’s not Sens. Kent Conrad or Al Franken talking. That’s the South Florida Tea Party, the largest tea party organization in Florida, in a November blog post.
And unless and until global free-trade agreements result in a true free market in sugar, the South Florida Tea Party has the winning point.
Audio & Video