Americans love sugar so much that we protect the domestic industry by limiting sugar imports. This works like a jawbreaker in the U.S. economy.
By keeping sugar prices artificially high, import limits result in food manufacturing job losses and higher prices for everything from hamburger rolls to sweet treats. Sugar industry protectionism is estimated to cost U.S. families as much as $2 billion annually, according to the Cato Institute. Domestic food processors — including General Mills, Hershey and Kraft — are pressing the U.S. Department of Agriculture to ease import limits to stave off a possible sugar shortage.
Although the department predicted last week that U.S. sugar supplies will drop 43 percent by September 2010, 1.25 million short tons of raw sugar sit in U.S. warehouses, according to the agency. The American Sugar Alliance, a sugar industry trade group, argues this is enough to meet foreseeable domestic demand for the sort of refined sugar that goes into products like cookies.
This doesn’t mean food producers are wrong in arguing that the department should increase the level of tariff-free imports when needed, as it did in 2006 and 2008, but import politics can be a sticky business. Big Sugar is a powerful lobby protected by lawmakers from sugar beet and cane producing states in the South and upper Plains.
Higher prices from import limits may protect sugar industry jobs, but protectionism is a detriment to the economy at large. According to a 2006 International Trade Administration study, each sugar growing and harvesting job saved by higher U.S. sugar prices results in almost three confectionary manufacturing job losses.
World sugar prices are at a 28-year high primarily because of lessened exports from Brazil — which is using lots of sugar cane to produce ethanol — and expectations that India’s yield will not meet demand.
Higher costs, whether artificially inflated or not, are passed on to consumers. This undermines the buying power of the U.S. dollar. Protectionist policy may be sweet for big sugar, but it is hard for the rest of us to chew on.