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What's Wrong with the Federal Government's Sugar Program

Source

• Consumers pay for the government sugar program

   

  The federal government sugar program costs consumers approximately $1.4 billion a year (40% or $561,000,000 for granulated, brown, and powdered sugar in bags and boxes, plus 60% or $824,000,000 in processed foods such as baked goods, cereal, candy, ice cream and beverages). This high "consumer tax" is maintained by restrictive import quotas and a high government loan rate which keeps the U.S. price of sugar at approximately twice the world price in most years. However, during 1999 the world price of sugar fell dramatically, as a result of heavy world supplies and other factors. The U.S. domestic price, almost completely insulated from world market signals, remained steady. Therefore, the U.S. price is now approximatley four times the world price.

   

• The sugar program endangers American jobs

   

  The sugar cane and sugar beet growing and processing industries are highly mechanized today. Therefore, shifts in sugar production would have little effect on the 50,000 jobs directly related to sugar production. On the other hand, over 500,000 jobs in the food processing industry will directly feel the impact of continued high U.S. sugar prices. Half of the nation's sugar cane refining capacity and its corresponding jobs have already been lost because raw sugar imports are so heavily restricted. Companies who are high-volume users of sugar in the manufacture of their food products will be faced with two options in the future: shut their plant doors, or move those plants to countries like Canada or Mexico where sugar is readily available at half the U.S. price.

   

• Sugar is still big trouble for the environment.

   

  Since the 1960s, the federal government sugar program has encouraged the conversion of over 500,000 acres of Everglades wetlands to sugar cane production. In addition, phosphurus-laden agriculture run-off is devastating the remaining natural Everglades. Almost $8 billion will be spent over the next 2 years to fix the Everglades and the problems that were made worse by the sugar price support program.

   

• The government sugar program received no real reform in the 1996 farm bill.

   

  While other farm commodities will see a phase-down of price supports and subsidies over the life of the new "freedom-to-farm" legislation, sugar price supports will remain extremely high, with no phase-down or phase-out provisions at all. The price support loan program was locked in at the 1995 level of 18 cents per pound for raw cane sugar and 22.9 cents per pound for refined beet sugar. And a restrictive low quota on sugar imports remains in place. Plus, the Secretary of Agriculture is authorized to make non-recourse loans to sugar processors and growers (meaning if the price of sugar goes down, the sugar can be forfeited to the government at the original loan price and the federal government takes the loss). A combination of high support prices, low import quotas, and the access to non-recourse loans makes sugar the best commodity deal in agriculture!

   

• Sugar growers are the elite among agriculture.

   

  Under the "freedom to farm" provisions of the 1996 farm bill, growers of all major program crops will see the level of support from the government drop significantly during the 7-year life of the bill. Yet the sugar program remains virtually untouched, and the average program benefits sugar producers receive will actually rise.

  By the final year of the current farm program (2002-03 crop year), the benefits per acre from the government's program will be only $33 for cotton, $27 for corn, and $16 for wheat. During that same time period, sugar program benefits are projected to rise 31% to $618 per acre!

   

• Expansion of U.S. trade and exports is hampered by the sugar program.

   

  The protectionist import quotas on sugar undermine the U.S. negotiating position on trade. As the U.S. attempts to break down other countries' barriers and gain new or additional access for American goods and services, the U.S. sugar program is often referred to by other countries as a barrier that we ourselves are holding up against the world. As a result, we lose our leverage in trade negotiations.

  We often hear that without such restrictive import quotas on sugar, the world would "dump" excess and subsidized sugar on the U.S. market. This is just not true. Even if we completely phased out the domestic sugar price support program, our countervaling duty and anti-dumping laws would ensure that no European Union or other subsidized or "dumped" sugar distorts the U.S. market.

  Other countries use our desire to protect out sugar program as an excuse to protect their own "sensitive" industries. As a result, we miss out on export opportunities. The coming Seattle Round of trade talks will be a key test of the U.S. government's dedication to free trade. What will we choose -- opening foreign markets for all U.S. farmers and ranchers, or keeping our own markets closed to protect a select few?

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