Monday, August 23, 2010

America's Absurd, Immoral Sugar Policy

Today Andy Roth at the Club for Growth pointed my attention to a recent WSJ article about the USDA agreeing to allow more imported sugar into the United States because of dire predictions of imminent shortages.  The article itself is pretty boring - it's clearly written for a target audience of commodities traders, with the author reporting in a ho-hum manner USDA's decision and the current US and global market situation for sugar.  But intended or not (and I'm siding with not), this short article provides oodles of evidence of just how awful - economically and morally - American sugar policy is.  Consider the following passages:
Global sugar prices soared on Friday after the U.S. said it will ease import restrictions to help avert a national shortage.

The U.S. Department of Agriculture on Thursday said it will give foreign sugar producers a bigger window to send sugar to the U.S. over the next two months.
Translation: US sugar policy is so enormously trade-distorting that the mere two-month easing of sugar import quotas caused a huge spike in global sugar prices (as the US sucks in supply, thereby leaving less sugar for the rest of the world and, naturally, higher prices).  Yeesh.
World prices for raw sugar reached a five-month high on Friday, rising above 20 cents a pound during the day. Sugar for October delivery finished 2.4% higher at 19.95 cents a pound.... 
Farmers counter that the food companies are just seeking ways to boost profits. U.S. domestic sugar prices are at about 34.13 cents a pound, up 30% in 12 months. ... 
Sugar is the second-most common ingredient in many bread products, and bakers are distraught over high prices, said Robb MacKie, president and chief executive of the American Bakers Association. The fall is the peak time of sugar use, as many manufacturers start to build up inventories of finished products to go into the winter.
Translation: Because of US restrictions on sugar imports, American sugar prices are currently almost 75% higher than world market prices.  This extra cost is initially borne by sugar-users (e.g., American bakers), who will pass it on to American consumers (particularly families with sugar-loving kids).  In short, American parents are paying for US sugar protectionism; and by spending more of their hard-earned dollars for candy, sodas, cakes and cookies, cereal, etc. than they would in the absence of such protection, they have less money to spend on other family necessities (like shoes, clothing, other foodstuffs, etc).  So sorry, Timmy.  No new soccer shoes for you, because American sugar quotas make Mom and Dad's annual grocery tab a whole lot higher.  Pretty nice, huh?  Oh, and guess who benefits from this protectionism?
The USDA was responding to intense lobbying from sugar users, who claimed the country was in danger of running out of sugar. The USDA this year has twice increased its import quota at the behest of sugar processors and food manufacturers. The sugar users have long been vocal critics of the government's restrictions on sugar imports, which they argue are designed to protect American farmers by keeping U.S. sugar prices inflated....
The U.S.'s ability to tap the broader market is limited by longstanding import restrictions set by law. The so-called tariff rate quota is set every year at slightly more than 1.2 million tons, and the USDA can raise it only in April following the start of the fiscal year in October.
Oh, riiiiight.  So American sugar producers are cashing in on "longstanding import restrictions set by law," and American families are footing the bill.  And American sugar quotas are so absurdly, anti-marketly (not a word, I know) rigid, they can only be altered once per year after a six-month delay.  That makes perfect sense.

Or not.

1 comment:

RickRussellTX said...

More importantly, the execrable US obsession with bolstering domestic sugar prices means that I have to pay for Mexican Coca-Cola to get the smoky caramel flavor of real cane sugar that I'm hankerin'.

That's right, I said hankerin'.