Sugar tariffs are sweet for special interests, sour for the rest of us
Last week, Florida Congressman Tom Rooney offered what he calls “a conservative case for sugar tariffs.” Whether it’s called conservative or liberal, Congressman Rooney’s argument is at odds with basic economics. Sugar tariffs are a sweet deal for special interests, but they’re a sour deal for the rest of us.
Congressman Rooney refers to sugar tariffs as a “no-cost policy,” but one of the first lessons of economics is that there’s no free lunch. There are easy-to-identify benefits for special interests (sugar producers, in this case), but there are harder-to-see but no-less-real costs to sugar consumers. These losses exceed the gains to producers.
Tariffs pick consumers’ pockets in three ways. First, they transfer resources from consumers to domestic producers. The additional earnings for sugar producers come out of the pockets of sugar consumers. Second, they transfer resources from consumers to the government, which collects revenue from tariffs. Third, they transfer resources from consumers to … no one: tariffs waste resources, and ultimately the losses to consumers are greater than the gains to producers.
Sugar protectionism is (literally) a textbook example of a policy that wastes resources. My macroeconomics students understand this. The same day Congressman Rooney’s article was published, my students submitted short essays explaining whether the government should or should not do more to restrict international trade.
They showed that they know what Congressman Rooney apparently doesn’t. “The benefits of international trade greatly outweigh the benefits of domestic production. … The United States could get … sugar from Brazil, [which] has a comparative advantage in sugar, and use the resources it is using to make sugar to make other products.” “When a country places trade restrictions on certain industries, it also takes away time, resources, and labor that could be used in another industry.” “Trade simultaneously creates and conserves wealth by producing more output with given resources, thus requiring fewer resources to produce a given output.”
Congressman Rooney argues that Florida producers have some of the lowest costs in the world, but if sugar prices on the world market are lower than the costs of production in Florida, then producing sugar in Florida is inefficient. While he is making this argument, he also claims that Florida producers cannot compete with the cost of labor in Brazil, which suggests that Florida’s production costs aren’t as competitive as they might seem at first.
I haven’t yet mentioned another source of waste from sugar tariffs: the resources consumed by lobbying for tariffs and special privileges. Lobbyists for sugar interests are investing considerable time, talent, and treasure in efforts to pick the pockets of consumers. This is time, talent, and treasure that could be going toward the production of valuable goods and services but that is instead wasted in zero-sum or negative-sum political battles. Someone who robs convenience stores makes society worse off. Someone who lobbies for sugar tariffs does, too. Once again, my students understand this: consumers have no “motivation to lobby against protectionism and instead, the producers who are profiting spend countless hours expending energy lobbying for the continuance of a tariff, which [are resources] that could be spent elsewhere.”
Congressman Rooney also cloaks his case in the rhetoric of “security,” but sugar is produced in a globally competitive market. There are also a lot of substitutes, like corn syrup and artificial sweeteners. If the Brazilian government is subsidizing its own sugar producers, they’re effectively taxing their own people and buying stuff for us. In effect, the Brazilian government is taking money out of its own taxpayers’ pockets and putting it into the pockets of American consumers.
Congressman Rooney would do well to heed the wisdom of 19th-century economist Frederic Bastiat. In the words of one of my students, “Restricting trade is using force with the intent to increase production, but it is costly. In What is Seen and What is Not Seen, the economist Frederic Bastiat writes, ‘To use force is not to produce, but to destroy.’ Destruction takes away opportunities for innovation and growth, and it leads to a static society.”
Tariffs benefit special interests, but the losses to consumers are larger than the gains to domestic producers and the government. As a country, we would be better off without sugar tariffs.
Art Carden is Assistant Professor of Economics at Samford University’s Brock School of Business, a Senior Research Fellow with the Institute for Faith, Work, and Economics, a Research Fellow with the Independent Institute, a Senior Fellow with the Beacon Center of Tennessee, and a regular contributor to Forbes.com and the Washington Examiner. Abby Colella, Alex Gerrish, Lauren Hunt, Hunter Longley, and Rebecca Vander Veer contributed to this article.