Since when do we coddle cartels?

Alan Daley Writer, American Consumer Institute
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The farm bill (S. 954) plans for the U.S. sugar cartel to continue the tradition of pillaging Americans. Already through the Senate, the bill needs House action, notably removal of government’s obligation to ally with the sugar cartel against American consumers, workers, and taxpayers.

The US consumes about 10 million tons of cane and beet sugar annually; 8 million from the sugar cartel, 2 million from Mexico, and a small amount from some import quotas. The farm bill obliges the federal government to loan money to the sugar industry and to accept sugar in repayment if prices drift below expectations.

As if they couldn’t do it for themselves, the government controls sugar production volumes and assigns crop quotas for the cane and beet factions within the cartel. The sugar program also requires the government to buy any excess sugar and to sell at a lower price to ethanol producers.

The Congressional Budget Office estimates this sugar subsidy to the energy industry via the feedstock flexibility program will cost the taxpayer $239 million in 2013. Of course, this is expensive “green” nonsense because the U.S. has access to adequate supplies of petroleum and ethanol without government subsidy.

The combined effects of limits on production, industry loans, and forced purchases push U.S. prices to about double what the rest-of-world pays for sugar.  The excess cost passed to consumers is estimated at $2 billion to $3.5 billion; consumer purchases in 2012 were priced at 43.4 cents per pound in the US versus 26.5 cents per pound elsewhere.

Each five pound bag you buy is priced $1 above what it should cost. And that’s after the federal government already made a hefty contribution to the sugar cartel’s profit margin. The result means artificially higher sugar prices, and this makes American consumers the big losers in this deal.

The excessive sugar prices are a compelling factor behind the departure of major food manufacturers such as Hershey Foods, Lifesavers, Brach’s and others. Many of these companies are moving plants to Canada and Mexico, and taking thousands of jobs that used to employ Americans. The sugar cartel likes to point to the 146,000 jobs in the industry, but the Department of Commerce found that high sugar prices suppress three times as many jobs outside the sugar industry. So, along with consumers, workers are big losers too.

In its latest spasm of throwing its weight around, the sugar cartel is intent on choking other U.S. industries such as rice, dairy, and manufactured goods. Through its political friends, the sugar cartel is blocking U.S. participation in the Trans Pacific Partnership trade deal because it requires opening the sugar cartel’s stranglehold on U.S. sugar.

The Trans Pacific Partnership (TPP) would render long-term economic benefits to the U.S., namely $124 billion in U.S. exports and hundreds of thousands of U.S. jobs by 2025. A big benefit of membership would certainly be replacing the government-sanctioned sugar cartel with a normal marketplace and the self-sufficiency of sugar producers.

As beneficiaries of the TPP, U.S. consumers could pocket the extra $3.5 billion or use it on foods healthier than sugar.  The widespread economic buoyancy from $124 billion in exports and lower sugar prices may induce manufacturers who left the U.S. to return with some of the jobs.

Perhaps more satisfying, our federal government could cease to manage the sugar cartel and prop up prices on its own. The cartel long ago became solidly lucrative and most undeserving of government protection.

The sugar cartel is a cancer we cannot afford. It’s too arrogant, too greedy, and, through elected officials it controls, far too powerful.

TPP membership looks like a step in the right direction, but regardless of that decision, dismantling farm bill provisions that empowers the sugar cartel is a must.

Now is the right time to ditch this malignant cartel in favor of higher exports and competitive prices for consumers. Every day is a good day to vote for the consumer and not for the cartel.

Alan Daley is a retired businessman who lives in Florida and writes for The American Consumer Institute Center for Citizen Research.