Sunday, April 3, 2005

If American consumers and taxpayers have learned any lesson over the years it’s that sugar producers don’t like competition. In fact, they loathe it. Always have.

Since 1820, when Louisiana sugar planters successfully argued for high tariffs to prevent a collapse in the value of slaves, the industry has used political influence to fleece consumers and taxpayers and avoid competition. No other industry has used its deep pockets and vast political clout ($22 million of campaign contributions to both parties since 1990) to restrain trade and competition.

American consumers have been the victims. In 2004, government price controls through trade quota restrictions and loan guarantees priced U.S. sugar at more than 20 cents a pound, about 2 times the world price. This means Americans spend about $2 billion more yearly in higher prices for sugar and food items that contain sugar than if we had a free market in sugar. The gains from this sweet deal are conferred upon the sugar plantation owners — mostly large, financially healthy conglomerates.

One effect of the artificially high price of sugar is candymakers and other domestic food producers that use sugar as an ingredient have begun exporting production out of the United States to get lower-cost sugar and keep their own prices competitive. A few years ago, Life Savers, the hard-candy producer, moved its operations to Canada for access to lower-priced sugar. Thousands of jobs are lost this way.

How is the racket perpetuated? One answer is sugar producers have tremendous political influence. Geographically concentrated in Florida, Louisiana and key Upper Midwest swing states, they practically invented the political patronage game. There has been no change in recent years — since 1990, the industry has donated more than $22 million — about $12 million to Democrats and $10 to Republicans.

Sugar has consistently been protected in farm bills, including the 1996 Freedom to Farm Act, which failed in its attempt to end farm socialism in America, and the bloated 2002 farm bill that again extended sugar quotas and tariffs.

Sugar carveouts for sugar are in all of our recent trade agreements, nearly derailing negotiations on a pact with Australia last year. And despite provisions that would only very modestly increase sugar imports, the industry is lobbying fiercely against the pending Central American trade deal.

The sugar industry now faces a new competitive pressure, this time not from foreign producers but from lo-cal artificial sweeteners. The latest target of big sugar’s wrath is the sugar substitute Splenda. Big sugar is doing all it can to bully this competitor off the store shelves.

Most alternative sweeteners are made of corn syrup, which, for instance, is now used in most soft drinks. Researcher Michael Fumento of the Hudson institute recently calculated sugar and corn syrup add about 700 calories a day to the average American’s diet, which accounts for up to a third of the recommended daily calorie level. With obesity now becoming one of America’s largest public health problems, the lo-cal market is surging for pink and blue packet products like NutraSweet, Sweet ‘N’ Low, and now Splenda.

Splenda is a runaway financial success. The zero-calorie sweetener, approved by the Food and Drug Administration in 1998, has already captured more than half artificial sweeteners market. And here is what causes heart palpitations over at Big Sugar: Splenda is now doing something other artificial sweeteners have failed at — cutting into sugar’s market share.

Sugar sales are declining — they were down 1.8 percent in 2003 and dropped another 4.31 percent in 2004.

So naturally, sugar producers turned to their pals in government, furiously lobbying health authorities to no effect. Studies have consistently shown that Splenda is safe. Science triumphed over raw political power. If anything, a very strong case can be made that sugar is worse for your health than Slenda because sugar contributes to obesity.

Now the sugar producers are turning to more desperate tactics. They’ve turned to the government to shut down their competition — this time through lawsuits and complaints to the Federal Trade Commission. Big Sugar alleges Splenda is engages in false advertising when it says “Splenda is made from sugar, so it tastes like sugar.” The trouble for the sugar industry is the claim is true. And aren’t millions of consumers choosing to buy Splenda a pretty strong signal they do like the way it tastes?

After nearly 200 years of special privileges from government to big sugar, shouldn’t government force free and open competition? This is hardly an infant industry. In the next farm bill, trade barriers and price supports for the sugar industry should be torn down. They reduce consumer sovereignty.

At the same time, specious claims against sugar substitutes like Splenda should be dismissed. Consumers should be king in cases like this, not deep-pocket lobbyists for Big Sugar.

It’s time to put the interests of millions of consumers ahead of the handful of influential sugar producers and to let market forces of competition, not political clout, determine what we sprinkle on our cereal.

Stephen Moore is president of the Free Enterprise Fund and a senior fellow at the Cato Institute.

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