NCPA - National Center for Policy Analysis

Sugar Policy Bitter for Consumers, Manufacturers

October 20, 2011

It's almost Halloween and time for trick-or-treating.  Americans are expected to spend more than $2 billion on candy this holiday, according to industry reports.  But here's a fact that should scare consumers: They're probably paying more for that candy than they should be -- thanks to a little-known part of U.S. agricultural policy, the sugar program, say Sens. Jeanne Shaheen and Mark Kirk.

  • Created in 1934 and modified several times since, the sugar program is a complex system that often escapes public scrutiny.
  • It includes price supports, which establish an artificial floor on sugar, and import restrictions, which prevent foreign sugar from bringing U.S. sugar prices in line with the rest of the world.
  • It costs consumers and sugar-using businesses $4 billion a year.

The program also includes a bizarre system of market controls that dictate to the nation's established sugar producers how much each company is allowed to sell.  No producer can exceed its allotment, and no new player is allowed to enter the market.

This is a unique system in our economy -- and it applies only to sugar.  The end result is a U.S. sugar price that's almost twice the world average.  That translates into a direct impact on U.S. consumers.

Most alarming, high sugar prices affect jobs.

  • The sugar program benefits about 4,700 growers of sugar cane and sugar beets nationwide.
  • But it hurts more than 600,000 people working in sugar-using industries nationwide -- from candy makers to bakers.
  • High sugar prices were responsible for the loss of 112,000 jobs in those industries between 1997 and 2009, according to industry analysts.
  • For every sugar-growing job saved through high U.S. sugar prices, according to a 2006 Commerce Department study, approximately three jobs in sugar-using industries are lost.

This policy puts U.S. businesses at a terrible disadvantage.  Imported products that use sugar are relatively free of punitive tariffs.  That means foreign competitors in the confectionery industry are using cheaper sugar so they can undersell American companies.  The result is a loss of American jobs as U.S. factories shut down and international firms locate new facilities outside the United States.

Source: Sens. Jeanne Shaheen and Mark Kirk, "Sugar Policy Bitter for Consumers, Manufacturers," Politico, October 17, 2011.

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