TRQs

USDA may increase sugar quotas

by Fran Smith on April 14, 2010

in Agriculture, International, Trade

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.

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.