“Sweet” Subsidies Increase Prices and Discourage Competition

Last month, the Coalition for Sugar Reform sent a letter to United States Trade Representative Michael Froman urging a complete Trans-Pacific Partnership (TPP) agreement that includes expanded sugar market access. Due to U.S. import restrictions and subsidies, Americans pay almost twice as much per pound than the rest of the globe for sugar. The federal sugar program authorizes sugar manufacturers nonrecourse loans directly correlated to the amount of sugar the government says they can produce at a set price each year. Currently, this is set at 18.75 cents per pound for raw cane sugar and 24.09 cents for a pound of refined beet sugar. Due to a price guarantee in the loan, sugar processors can make a profit whether or not the market price is above the loan price; clearly, they have no objections to this extraordinarily beneficial arrangement.

A January 2014 USDA report found that the government’s net cost “to remove” what they have deemed as excess sugar from the marketplace was $258 million for the 2013 crop year. Does this seem like a legitimate use of taxpayer money? The federally set quotas, tariffs, and restrictions on the sugar market are causing the food and drink industry in the United States to be less competitive. Competition is vital to economic prosperity; without it, there is no incentive for innovation. The Coalition for Sugar Reform explained the critical flaws of our current system in their recent letter:

Overly protective treatment of sugar  producers has widespread negative effects on our economy. We’ve lost more than 120,000 jobs in sugar-using industries since 1997, and denial of real access to our TPP trading partners leaves us vulnerable to other countries’ refusals to open markets to valuable American agricultural commodities. This self-imposed handicap also stifles our progress on other significant trade priorities and prevents much-needed opportunities for critical American industries to grow their exports.

U.S. sugar reform is long overdue. In order to protect our consumers, small businesses, and manufacturers, we hope that Congress will recognize the vast harm that these regulations inflict on free trade and vote to limit the size of nonrecourse loans to any single sugar processor. By increasing sugar market access in international trade agreements, Congress could take a step in the right direction towards fixing (no pun intended) our sugar prices.