NCPA - National Center for Policy Analysis


March 10, 2006

It isn't often that circumstances hand the government a chance to remove trade barrier without harming a coddled United States industry. But the current surge in world sugar prices is serving up precisely that opportunity to President Bush, says the Wall Street Journal.

With the world price for raw cane sugar hovering around 18 cents per pound, the farm loan-rate at 18 cents for cane sugar and the United States economy experiencing sugar shortages, the United States market could be opened without incurring huge costs at the USDA. Meanwhile, the benefits of restoring supply-demand signals to the sugar market would be huge, says the Journal:

According to a new U.S. Commerce Department study:

  • For every sugar growing and harvesting job saved through high U.S. sugar prices, approximately three confectionery-manufacturing jobs are lost.
  • For the confectionery industry in particular, evidence suggests that high U.S. sugar costs are a major factor in relocation decisions. In 2004, the price of U.S. refined sugar was 23.5 cents per pound compared to the world price at 10.9 cents.
  • Many U.S. sugar-containing products manufacturers have closed or relocated to locations where sugar prices are less than half of the U.S. price.

The program has not helped the trade deficit either because even though U.S. sugar production is protected, trade in SCPs is not; the report stated that "the trade imbalance in SCPs increased nearly five-fold over 1997 to 2002 to $4.7 billion," while "foreign manufacturers' access to lower-priced sugar contributes to increased imports and hinders U.S. manufacturers' abilities to compete both here and abroad.

Now that a spike in world prices has put the United States on par with foreign producers, there is a window of opportunity to do away with a sugar program that costs American jobs and has become a source of trade friction around the world, says the Journal.

Source: Editorial, "Sweet Opportunity," Wall Street Journal, March 6, 2006; and "Employment Changes in U.S. Food Manufacturing: The Impact of Sugar Prices," U.S. Department of Commerce, February 14, 2006.

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