The Justice Department recently announced it is suing to block U.S. Sugar’s proposed acquisition of Imperial Sugar. According to Assistant Attorney General Jonathan Kanter of the Justice Department’s Antitrust Division, “U.S. Sugar and Imperial Sugar are already multibillion-dollar corporations and are seeking to further consolidate an already cozy sugar industry. Their merger would eliminate aggressive competition in the supply of refined sugar that leads to lower prices, better quality, and more reliable service.”
It’s true that the American sugar industry is pretty cozy. But if the government is serious about doing something about it, it should direct its focus on the costly federal sugar program.
As described by the U.S. Department of Agriculture (USDA): “The U.S. sugar program uses price supports, domestic marketing allotments, and tariff-rate quotas to influence the amount of sugar available to the U.S. market.” By “influence,” USDA means “restrict,” and the sugar program’s restrictions have been remarkably successful at increasing prices for American businesses and consumers. As of November 2021, the average wholesale price for refined cane sugar in the United States was 55 cents per pound. The average world price for refined sugar was just 23.05 cents per pound.
In other words, this OPEC-style cartel makes Americans pay more than twice the world price for sugar.
In the 1800s and early 1900s many politicians and pundits commented on the relationship between high tariffs and monopolistic trusts. In 1907 one author observed: “The protective tariff is the genesis of the trust. The trust comes out of it as naturally as fruit from the blossom.”
More recently, Alden F. Abbott and Andrew Mercado of the Mercatus Center elaborated on the sugar program's impact: “The story of sugar illustrates, once again, that while antitrust has a key role in preventing private anticompetitive schemes, the worst abuses of the competitive process too often stem from government itself.”
One response would be for Congress to pass the Fair Sugar Policy Act, introduced by Senators Jeanne Shaheen (D-NH) and Pat Toomey (R-PA) and Representatives Virginia Foxx (R-NC) and Danny Davis (D-IL). Among other things, the Fair Sugar Policy Act would lift restrictions on the domestic supply of refined sugar and reduce market distortions caused by sugar import quotas.
Even better, if the Biden administration really wants to promote aggressive competition in the supply of refined sugar that leads to lower prices, better quality, and more reliable service, it should lead efforts to eliminate the costly sugar program.