Chinese steel subsidies, and the world’s grossly distorted metals market, became front-page news recently as President Trump announced new tariffs to level the playing field and salvage U.S. jobs.
So-called free-trade advocates howled and are fighting harder against the president of the United States than they ever did against China for manipulating the market in the first place.
News flash to these critics: Free trade isn’t free when one side subsidizes its product to distort prices. Price mechanism, without subsidies, is the fundamental tool that makes the free market work.
Steel might be getting all the headlines today, but it’s hardly an isolated example. Many of the same groups fighting President Trump on steel are currently lobbying lawmakers to reward foreign subsidizers to the detriment of U.S. workers in the world of sugar, too.
Sugar is one of the most widely used food products around the world, yet three-quarters of the world’s sugar crop is never traded on an open market. That’s because widespread subsidies have driven prices on the open market well-below production costs.
In other words, global sugar producers would lose money on every sale without the aid of foreign treasuries.
Unfortunately, far too many conservatives, who allegedly believe in free trade, don’t want to do anything to stop the foreign market manipulation.
Brazil is to sugar what China is to steel. It spends a whopping $2.5 billion per year on massive sugar subsidies, and thanks to these subsidies, has gained control of half of global exports. This gives Brazil the ability to control price similar to OPEC.
Brazil isn’t alone. India subsidizes. Thailand subsidizes. So does Mexico. And they are just at the top of the list.
Meanwhile, American farmers and producers aren’t receiving direct subsidy payments from the government – a fact that is widely misrepresented. And the price U.S. producers are selling sugar for is relatively comparable to when President Reagan was in office.
That leaves American farmers particularly vulnerable to the risks of bad foreign actors, which bend and break global trade laws to gain an unfair advantage. For proof, just look to Hawaii, which closed its century-old sugar industry in 2016 as a result of predatory trade practices by Mexico.
America needs to stand up for a true free market in world trade – whether it’s in steel or sugar or any other product that benefits the U.S. economy and creates jobs.
In Congress, there is a proposal to do just that. Introduced by Rep. Ted Yoho, Florida Republican, this “Zero-for-Zero” sugar plan simply states that if other sugar-producing nations drop their sugar subsidies, the United States will drop its tariffs.
That is free trade at its core. The most efficient businesses, not the most subsidized, are rewarded.
After steel, sugar provides President Trump a great opportunity to stand up and say free trade will happen only when the trade is really free. It will happen only when other nations stop subsidizing their sugar producers.
It will only happen when other nations drop their tactics that distort the free market.