The U.S. Sugar Program: Bad for Consumers, Bad for Agriculture and Bad for America

May 1, 2012

Government interference in the sugar market hurts consumers and food manufacturers by driving up the price of sugar, threatening competitive farmers and ranchers by jeopardizing export growth, and weakening the U.S. economy by diverting resources from more competitive uses, says Bryan Riley, a senior policy analyst at the Heritage Foundation.

The U.S. government artificially inflates sugar prices by imposing quotas that cap the amount that food manufacturers and consumers in the United States can buy from producers in other countries.  Exceeding this cap initiates the emplacement of a more or less prohibitive tariff on the sugar, thereby creating an effective barrier to trade.

Proponents of the barrier (namely, the sugar industry) claim that this is a no-cost policy for the government, but this is patently false.

  • Despite the fact that government is not technically transferring funds to sugar producers, the policy drives up prices that American sugar consumers pay.
  • According to the U.S. Department of Agriculture, in March, the price of raw sugar was 40 percent higher in the United States than in the rest of the world.
  • Such protection is afforded to those who know how to lobby Congress: though sugar accounts for just 1.9 percent of the value of total U.S. crop production, sugar producers fund 55 percent of crop-related political action committee donations.

Similarly, sugar industry advocates claim that the quota has not harmed consumers financially in any recent year, but again, this is untrue.

  • According to the U.S. International Trade Commission, the sugar program imposes a $49 million net cost on the economy.
  • According to a study commissioned by the Sweetener Users Association, the program costs consumers $2.9 billion to $3.5 billion.
  • According to a study by the American Enterprise Institute, the program costs consumers $2.4 billion per year, with a net economic cost of $1 billion per year.

The American Sugar Alliance justifies much of this expense by stating that 71 percent of Americans prefer to buy homegrown sugar, even if foreign sugar is cheaper.  Such a statement should be put to the test by allowing domestic and foreign suppliers to compete on even footing.

Source: Bryan Riley, "The U.S. Sugar Program: Bad for Consumers, Bad for Agriculture, and Bad for America," Heritage Foundation, April 18, 2012.

For text:

http://www.heritage.org/research/reports/2012/04/us-sugar-program-bad-for-consumers-agriculture-and-america

 

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