Big Sugar's Sickeningly Sweet Deal

WASHINGTON POST -- Down on the farm, the latest dispute pits America's sugar producers against their biggest customers: food manufacturers that add the sweetener to everything from raisin bran to raspberry yogurt. The food makers are unhappy with a recent tightening of supplies that has pushed the wholesale price of refined sugar to 35 cents per pound (see sugar futures prices above at 28-year highs). Warning of higher grocery prices and lost jobs, the manufacturers want Agriculture Secretary Tom Vilsack to allow more imports. Domestic sugar growers insist that supplies are adequate, thanks in part to imports of Mexican raw sugar to U.S. refineries, which were allowed on a tariff-free basis for the first time last year as part of the North American Free Trade Agreement.

Since 1982, domestic sugar producers have lobbied for, and gotten, a government-guaranteed share of the market. Today, their guaranteed share is up to 85%; the rest gets divided up among some 40 countries lucky enough to hold quotas of varying sizes. The advent of free Mexican imports upset this scheme somewhat, which is why the 2008 farm bill promised that the government would offset them by purchasing excess U.S. sugar and shipping it to ethanol factories. In addition, the federal government guarantees minimum prices for both raw cane sugar and refined beet sugar. Pretty sweet.

To be sure, the various sugar programs don't involve the huge direct outlays of taxpayer money that other farm supports do. In a way, though, they're even worse, since the blatant protectionism operates as a non-transparent tax on every product that uses sugar as an input. Free trade in sugar would bring short-term disruptions for domestic refineries and the growers who own them but, ultimately, greater efficiency and fairness for U.S. consumers and our trading partners. Alas, we're probably stuck with the status quo -- and the wasteful inter-industry political battles it engenders -- at least until Congress writes a new farm bill in about four years.

MP: Couldn't we apply our current energy policy to sugar, and significantly restrict domestic sugar production and open up our borders to lower-priced world sugar?

Originally posted at Carpe Diem.