Sugar producers got a sweet deal in the 2008 Farm Bill. Now, with the next bill scheduled for 2012, some opponents of the U.S. sugar program are already positioning themselves for another battle over one of the most egregious examples of central planning that raises prices for consumers and costs jobs.
On September 29, 2010, Rep. Joe Pitts (PA-16) introduced a bill — The Free Market Sugar Act — that takes direct aim at the sugar program administered by the U.S. Department of Agriculture. Here’s Pitts’ statement:
The USDA sugar program is a needless waste of government money that is actually counterproductive to the goal of creating jobs in the U.S. Using taxpayer money to back loans to the sugar industry and buy sugar should not be a function of our federal government. Since the program actually raises the U.S. price for sugar, we see some food industry jobs shipped overseas.
Sugar producers are using the public backing to pocket healthy profits. The American people are fed up with bailouts, and my legislation would stop public money from propping up companies that should be providing for themselves.
Other policy makers were taking their own steps to focus attention on sugar and the next farm bill. Congressmen Danny Davis (D-IL) and Mark Kirk (R-IL) sent a “Dear Colleague” letter to their fellow members of Congress asking them to sign on to a letter to the House Agriculture Committee leadership. The letter points out some of the major problems with the program that need to be corrected in the 2012 farm bill:
The U.S. Department of Agriculture is keeping sugar prices at all-time highs by limiting the amount of sugar that can be grown in the United States and imported each year to meet domestic needs. The sugar program is being run solely for the benefit of sugar growers and processors, with complete disregard for consumers and other sugar users. The net result is that consumers are paying more for food products and workers are losing jobs at food processing and manufacturing plants.
It’s good that they’re starting early to position this issue, because they will be facing the sugar lobby, one of the strongest lobbies on the Hill — that day-in-an-day-out focuses on this one issue and spreads their largesse in a bipartisan manner.
See some of CEI’s earlier articles on the sugar program here and here.
The Wall Street Journal reported today that the U.S. Department of Agriculture may increase the import quotas for sugar to address a tightening supply and possible shortages. Currently, about 40 countries can export a specified quantity of sugar to the U.S. under what’s called a tariff rate quota (TRQ). TRQ sugar has low or no tariffs, while above those amounts, sugar is subject to stiff tariffs. Only one country, Mexico, under the North America Free Trade Agreement, is not under the quota system.
Under the 2008 Farm Bill, the USDA had to wait until April 1, 2010 to decide whether to increase the quotas. Last week, the U.S. Trade Representative announced that it was reallocating some of the 2010 quota amounts that hadn’t been used by certain countries to quota-holding countries that are exporting sugar to the U.S. Brazil, the Dominican Republic, the Philippines, and Australia received the bulk of the reallocations.
The TRQ system is part of the U.S. sugar program that keeps the price of U.S. sugar generally twice as high as the world price through domestic supply constraints, import restrictions, and price supports for U.S. producers. It’s a central planning approach that raises the cost of sugar and sugar-containing products for consumers, causes job losses as confectionery firms are hit by higher costs, and harms poor sugar-producing countries that can’t compete with U.S. “subsidized” sugar. See some CEI ideas for terminating this program.
In an editorial today, the Washington Post attacks U.S. sugar policy, with its price supports and import restrictions that raise the cost of sugar in the U.S. about 15 cents per pound higher than the world price.
Though the sugar program is mandated by farm bills – the latest in 2008 — the Post rightly points out that the Administration can take a small step to allow more market-priced sugar to come into the country. The Secretary of Agriculture can increase or reallocate the sugar quotas that are allocated to 40 countries, some of which, such as Haiti and Jamaica, that haven’t exported sugar to the U.S. in years. Under those quotas, which haven’t been changed for years, quota-holding countries can export sugar to the U.S. at low or no tariffs. Amounts above those tariff rate quotas face high duties.
For CEI background on the sugar issue and proposals for reform and CEI support for increasing the quotas, see CEI’s website and here and here and here.
Today the front page of the Wall Street Journal published an article (subscription required) focusing on the current fight to increase the amount of sugar certain countries can export duty-free to the U.S. Those quotas are part of the U.S. sugar program, together with the program’s price supports and domestic production restrictions; it has long needed to be dismantled. But the major opportunity to do so – the last farm bill — just made the sugar program worse. The centrally controlled program results in U.S. sugar prices usually double the world price, which means consumers pay more for many products, and sweetener-using companies look for opportunities in other countries where their sugar costs are less.
There is limited flexibility in the sugar quota system, whereby about 40 countries are allowed to export a predetermined amount of sugar without tariffs; above that amount, stiff tariffs are levied. Before April 1 the U.S. Secretary of Agriculture can increase the quotas if there is an emergency or disaster. After April 1, the USDA can reallocate the quotas or increase them. Sweetener users say that more imports are needed mainly because of the price differential between the U.S. and world sugar price but also because users may face a shortage of domestic sugar in the near future.
CEI has long pushed for the abolishment of the sugar program. See here and here and here for a few CEI publications on the sugar issue.
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