- The Washington Times - Wednesday, March 27, 2002

Government sugar programs that prop up prices might taste sweet to farmers, but they are a bitter pill for the only factory that makes Life Savers.
The Holland, Mich.,factory will close by next year, and its owner, Kraft Foods, will shift production to a facility outside Montreal, ostensibly because it is consolidating operations at a single location. But local officials who assembled a package of tax breaks to keep Life Savers in Holland have come to realize they are helpless against the real culprit: sugar prices.
"I was completely blindsided," said Chris Byrnes, president of the Holland Economic Development Corp. "We couldn't do anything about the price of sugar."
The cost of sugar, far from being decided by markets, depends on federal government policies designed to help farmers. But those programs force communities like Holland to "take it on the chin," as Mr. Byrnes put it, because manufacturers that use sugar often decide to do business in foreign countries rather than in the United States.
Brach's Confections, citing high sugar prices, moved a plant from Chicago to Mexico last year. Before that, Bob's Candies decided to produce candy canes in Jamaica, not Georgia, for the same reason.
With Kraft winding down its operations in Holland, Mr. Byrnes is nervously looking over his shoulder at other factories that make ice cream and breakfast cereal. They may decide that pricey sugar is not worth the hassle.
Federal policies have decided the price of U.S. sugar since the 1930s.
Sugar growers, who are concentrated in the South and the upper Midwest, receive a guaranteed price through government loans they receive using their crop as collateral. To keep out foreign sweeteners, the United States uses a complex network of quotas and high tariffs.
In 2001, the system kept the price of a pound of raw sugar around 21 cents per pound, compared with 9 cents on the world market.
The sugar industry, composed of cane and beet farmers, argues that 372,000 jobs depend on the program, and Congress seems to agree. The new farm bill being drafted will give the U.S. Department of Agriculture new tools to manipulate the supply of sugar, to the frustration of the program's opponents.
"It's the most egregious form of corporate welfare there is," said Rep. Dan Miller, a Florida Republican who has unsuccessfully sought to reform the sugar program.
But candy manufacturers see little attention being paid to their own welfare, and communities like Holland say they pay the price.
Sugar growers, sensitive to the notion that their program costs American jobs, blame the companies, not the cost of sweeteners.
"These international corporations are callously willing to put American workers and farmers out of business in favor of low-wage, low-cost foreign operations, but they are too ashamed to admit it," said Jack Roney, an economist with the American Sugar Alliance.
But Kraft's decision to take Life Savers production out of Holland underscored that, in competition with a high-wage country like Canada that has no government sugar program, American sugar prices are a serious liability. Mr. Byrnes, an economic development official for 15 years, notes that he often has lost out to countries like Mexico owing to labor costs.
"I never, ever lost out to Canada," he said.
Kraft told the city last year that the Holland plant was on a list of 17 facilities that could be shuttered in a bid to increase efficiency, and that it needed to save $2 million to make it economical. About 600 jobs were at stake.
Mr. Byrnes calculates that, in the end, Kraft had a shot at $25 million in tax breaks and state assistance over 15 years. But a move to Canada, where sugar is much cheaper, will save the company $90 million, an amount the city and state simply could not match.
"We weren't even in the ballpark at that point," he said.


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