The Easter Bunny May Not Be Real, But Sugar Protectionism Is
With Easter right around the corner, customers are lining up for Peeps, jelly beans and supersized chocolate bunnies. Many people will not realize, however, that they’re paying a secret tax for these products due to archaic sugar policies rigged against consumers. A consortium of domestic producers use quotas and byzantine pricing systems to their advantage, ensuring grossly overpriced products for all Americans.
But as lawmakers consider much-needed reforms via a new farm bill, Big Sugar is ready to fight to keep the bitter status quo in place. System proponents have advocated for a policy known as “zero for zero,” in which the United States pledges to unwind favoritism if foreign governments also do so. But current sugar programs cause domestic job losses and hold back American growth by forcing customers and businesses to spend additional millions of dollars on food and beverages. As such, the current sugar program and the “zero for zero” rejoinder is a recipe for higher prices and lower prosperity. By acting decisively to reform the U.S. sugar program, Congress can lower sugar prices for millions of struggling Americans.
Through a byzantine array of tariffs and quotas, the current U.S. sugar program keeps prices artificially high for hundreds of millions of American customers each year. Foreign imports are strictly limited by existing legislation, forcing confectioners and bakers to foot the bill for sugar prices 9 cents per pound over the world market average. While this may seem inconsequential, Americans buy and consume more than 70 million pounds of candy each Easter. According to the American Enterprise Institute, needlessly-high sugar prices cost American customers up to $4 billion every year. Understandably, the 5,000 well-heeled agribusinesses benefiting from this arrangement aren’t exactly eager for the program to go away. The sugar lobby makes a big fuss about saving American jobs, but industry job loss estimates fail to take into account the job losses caused by the failed status quo. Estimates suggest that the current U.S. sugar program has resulted in 10,000 to 20,000 fewer American jobs.
Advocates of continued domestic favoritism respond that it would be “unfair” to modify or end the U.S. sugar program, while developing countries such as Thailand and India keep sugar export prices artificially low through subsidies. If we “unilaterally disarm,” the sugar lobby suggests, emerging Asian economies will eat our lunch by undercutting domestic producers. In practice, this “zero for zero” philosophy would likely keep the U.S. sugar program in place forever. Countries like Thailand and India are unlikely to completely cut out sugar subsidies due to concerns about domestic stability and federalism.
But fortunately, policymakers needn’t rely on conjecture to guess what would happen if America took the initiative on sugar reform. The European Union opposed “zero for zero” logic in 2006 when they implemented a wide-ranging quota relaxation and target price reduction scheme. Foreign sellers were finally let in, and prices were allowed to reflect global marketplace conditions. Despite grumblings and “cautionary tales” from the “zero for zero” community, the sky didn’t fall. Sugar prices have fallen in most of the years since reform, save for a turn-of-the-decade hike experienced by most countries. The going rate per ton is now around 20 percent lower than it was prior to reforms. In contrast, the United States has yet to recover from the price hikes of the Great Recession.
Like many misguided proposals, “zero for zero” sounds like a pragmatic, sensible idea. The reality, however, is a recipe for continued inaction against the failed status quo of protectionism. Real world experiences, such as the European Union’s successful relaxation of sugar laws, show that bold reforms can lower prices while keeping employment stable. As Easter looms, Congress should bear in mind the current costs of protectionism. By going the way of the European Union and opening up sugar market to competition, Congress can make Peeps affordable again.
Ross Marchand is the director of policy for the Taxpayers Protection Alliance.
The views and opinions expressed in this commentary are those of the author and do not reflect the official position of The Daily Caller.