The Great American Sugar Divide

April 5, 2011 Updated: April 5, 2011

WASHINGTON—In today’s bitter economy, often it is the simple pleasures that help us get through the day: a sweet tea or a chocolate bonbon can do a lot to make a person feel better.

Now, a few members of Congress would like Americans to be able to purchase more treats for less money by eliminating a government program that has the effect of elevating the cost of sugary goods sold throughout the U.S.

According to the Government Accountability Office (GAO), the U.S. sugar program imposes $1.9 in additional costs on consumers each year.

In recent years, that cost has risen to $4 billion, according to new studies, said Trudi Boyd, communication director for the Sweetener Users Association, speaking on behalf of the Coalition for Sugar Reform.

The government’s relationship with sugar producers and processors began in the early 1800s, when high tariffs were imposed on sugar imports to bolster the value of local sugar plantations.

Today, cheaper foreign sugar makes up only 15 percent of sugar sold on the U.S. market due to protectionist policies, while the remaining 85 percent of sugar produced domestically enjoys guaranteed pricing due to production quotas.

The result is a cost of sugar in the United States nearly twice the world market price. American prices have been higher than world prices for the last 44 out of 45 years.

Indiana Sen. Richard Lugar has called the sugar deal “one of the worst forms of government interventionism in America.”

“It picks the pocket of every American with a hidden tax, drives jobs overseas, and enriches a handful of powerful sugar producers in the United States,” he said in a press release the day that he introduced legislation to eliminate the program.

Lugar introduced legislation last week to repeal the government sugar intervention, and his efforts are supported by a significant list of trade associations representing manufacturers who use high volumes of sugar.

The industry is not small. The United States is the world’s fifth largest producer, as well as the fifth largest consumer of sugar.

Industry Response

Jack Roney, director of Economics and Policy Analysis for the American Sugar Alliance, the main body representing sugar producers and processors, said that every sugar producing country in the world uses government market interventions.

Sugar is an essential commodity, and world markets are volatile. The industry requires protections in order to remain viable, Roney said.

He said 80 percent of all sugar in the world is purchased through domestic markets, rather than the world markets.

Roney said that if the effort to eliminate U.S. sugar policy were successful, short-term gains would lead to long-term effects that would be even more undesirable for sugar-intensive manufacturers, and, ultimately, consumers.

“In the short run they would find themselves with less reliable supplies of lower quality sugar, while in the longer run as our companies fold with the onslaught of subsidized farming sugar, then the price would take off and rise to above U.S. levels,” he warned.

Marketing efforts promulgated by the American Sugar Alliance say U.S. sugar programs have accorded zero real cost to the government since 2002, and future projections are the same.

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