sugar

Take a Look at U.S. Tariffs – They Raise Costs and Restrict Choice

by Fran Smith on September 29, 2010

in International, Trade

With so much focus on “unfair” trade vis-à-vis U.S. trade partners, especially China, it’s sometimes sobering to look at protectionist U.S. policies that restrict imported goods and services by slapping them with high tariffs.  The Business Insider provides a good start in its focus on 25 imported products that have the biggest U.S. tariffs. Take a look at the highlighted tariffs that range from 20 percent on some dairy products to 37.5 percent for leather shoes, then 163.8 percent on unshelled peanuts up to a whopping 350 percent for imported tobacco.

But what do these tariffs mean for consumers?  Obviously, they raise their costs.  Ed Gresser of the Progressive Policy Institute has written extensively on how U.S. tariffs are really regressive — they hurt the poor the most by increasing the costs of needed goods, such as shoes and clothes.  Here’s what Gresser says:

Though the tariff system is smaller than other taxes, it is far more regressive. This is because poor people spend a greater share of their income on clothes and shoes than do wealthy or middle-class people. The cheap and simple goods made in poor countries and bought by low-income Americans are subject to far higher tariffs than luxury goods. An acrylic sweater attracts a 32 percent tariff, while a cashmere sweater gets only 4 percent; a polyester bra is tagged with a 17 percent tariff, while one made of silk gets less than three percent; and a cheap stainless steel fork is hit with a 19 percent tariff, while a silver-plated spoon has none at all.

Since the Business Insider feature only looked at tariffs, it missed some of the most egregious protectionist programs in the U.S. — the U.S. sugar program that guarantees sugar producers a certain price by restricting domestic supply as well as sugar imports.  Or take the U.S. cotton program that subsidizes a small number of cotton producers at taxpayer expense and makes it uncompetitive for many poor countries to export their cotton to the U.S.  As with these and other protectionist policies, they generally help a small group of producers by restricting competition, but the costs are borne by consumers in terms of fewer choices and higher prices.

Sugar in the News Again

by Fran Smith on August 24, 2010

in Agriculture, International, Trade

The U.S. Department of Agriculture’s September 2010 issue of its magazine, “Amber Waves,” has an excellent article on the U.S. domestic sugar program – its domestic market allotments, price supports, and import restrictions — and how even this program, which attempts to protect  U.S. sugar producers from competition and price fluctuations, is affected by volatility in the world sugar market.

And that’s a timely topic, as this Wall Street Journal  August 21 article makes clear.  What has happened would have been easy to predict.   Sugar users in the U.S. – mainly food and confectionery producers – have been asking the Secretary of Agriculture to increase the amount of sugar allowed to be imported into the country under tariff rate quotas that carry low tariff rates. Otherwise, sweetener users said, they would be facing supply shortages.  Under the 2008 Farm Bill, at the beginning of the quota year, the Secretary is required to set the initial quota at the minimum the World Trade Organization requires, and can’t increase that before April 1 unless there is an emergency.

As the WSJ article notes, once the Secretary raised the quota, world sugar prices rose to 20 cents per pound, the highest level in five months. That compares with U.S. domestic sugar prices of about 34.13 cents a pound, kept artificially high due to government-mandated supply restrictions on both the domestic supply and the imports allowed.

CEI has long advocated the termination of the U.S. sugar program, which benefits a relatively small group of sugar producers, while raising food costs for consumers. It’s a prime example of why central planning doesn’t work.

Sugar on the table again

by Fran Smith on August 13, 2009 · 2 comments

in Features, International, Trade, Zeitgeist

Sugar got front-page notice from the Wall Street Journal today. The article focused on a letter sent to the Secretary of Agriculture to increase the amount of sugar that can be imported without tariffs.  Prominent food firms as well as several nonprofit groups, including CEI, signed the letter.

Currently, U.S. sugar users are facing steep prices and a shortage of sugar.  Under  the U.S. sugar program – a system of price supports and import restrictions — there are quotas on the import of tariff-free sugar.  The USDA and the U.S. Trade Representative administer the import quotas for sugar, which must be consistent with the U.S. commitments to the World Trade Organization. That quota amount is allocated to 41 countries, which means that the sugar can enter the U.S. duty-free or with a low tariff.  Import amounts above that face a steep tariff, unless the USDA determines that the domestic supply can’t meet the demand and increases the quota amount.

That’s what the letter is asking:

Without a quota increase, consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted. Please act now in the interest of all Americans.

According to earlier studies by the General Accountability Office and the OECD, the cost of U.S. sugar policies to American consumers ranges from $1.5 billion to $1.8 billion.  See here and here for CEI publications on the sugar issue.