Skip to comments.Sugar Tariffs Cost Americans $3.86 Billion in 2011
Posted on 01/28/2012 4:40:52 PM PST by BfloGuy
The chart above displays annual refined sugar prices (cents per pound) using data from the USDA (Tables 2 and 5) between 1982 and 2011 for: a) the U.S. wholesale refined sugar price at Midwest markets, and b) the world refined sugar price. Due to import quota restrictions that strictly limit the amount of imported sugar coming into the U.S. at the world price, the domestic producers are protected from more efficient foreign sugar growers who can produce cane sugar in Central America, Africa and the Caribbean at half the cost of beet sugar in Minnesota and Michigan.
Of course, there's no free lunch, and this sweet trade protection comes at the expense of American consumers and U.S. sugar-using businesses, who have been forced to pay more than twice the world price of sugar on average since 1982 (28.6 cents for domestic sugar vs. 14 cents for world sugar, see chart). How much does this trade protection cost Americans?
We can estimate the cost of sugar protection, using some additional data from the USDA (Table 1) about sugar:
1. American consumers and businesses consumed 10.18 million metric tons (22.44 billion pounds) of sugar last year, and therefore every 1 cent increase in sugar prices costs Americans an additional $224.4 million per year in higher prices.
2. The U.S. produced 7.15 million metric tons (15.76 billion pounds) of sugar last year.
3. Due to quotas, Americans were only allowed to purchase 3 metric tons (6.67 billion pounds) of world sugar, or about 30% of the total sugar consumed. Domestic sugar producers ("Big Sugar") are allowed to control 70% of the sugar market every year through protectionist sugar trade policies that strictly limit foreign competition.
4. If sugar quotas were eliminated, and American consumers and business had been able to purchase 100% of their sugar in 2011 at the world price (average of 31.68 cents per pound) instead of the average U.S. price of 56.22 cents, they would have saved about $3.86 billion. In other words, by forcing Americans to pay 56.22 cents for inefficiently produced domestic sugar instead of 31.68 cents for more efficiently produced world sugar, Americans pay an additional 24.54 cents per pound for the 15.76 billion pounds of American sugar produced annually, which translates to $3.86 billion in higher costs for American consumers and businesses.
(Note: This is an estimate based on the assumptions that: a) the amount of sugar consumed in the U.S., and b) world prices, wouldn't change if the U.S. sugar market was completely open.)
Bottom Line: The cost of most trade protection is largely invisible and hard to calculate, but the cost of sugar protection is directly visible and measurable, since the USDA and the futures markets regularly report prices for both high-cost domestic sugar and low-cost world sugar. Like all protection, sugar tariffs exist to protect an inefficient domestic industry (sugar beet farmers) from more efficient foreign producers (cane sugar farmers), and come at the expense of the U.S. consumers and the American companies using sugar as an input, and make our country worse off, on net.
I'm reminded of the recent Quote of the Day from Bastiat: "Treat all economic questions from the viewpoint of the consumer, for the interests of the consumer are the interests of the human race." U.S. sugar policy has a long history, going back to 1789 when the First Congress of the United States imposed a tariff upon foreign sugar, and is a perfect illustration of trade protection that ignores the viewpoint of disorganized, dispersed consumers in favor of the concentrated, well-organized interests of producers.
And how much are we subsidizing home grown Florida sugar to pollute the land here
The Current FReepathon Pays For The Current Quarters Expenses?
Would removal of the tariff mean an end to those high glycemic corn sweeteners?
Could we finally get a decent bottle of Coke?
Check the international or hispanic section at Wal Mart. It is in a glass bottle and made in Mexico. It took awhile, but I even found it in coastal NC.
So sad that in order to get a "real" Coke, an American icon, you have to buy the stuff imported from Mexico.
And how many jobs at beet processing plants, truck drivers, etc would be lost to cheap imported sugar? What will happen to the beet contracts when the processors go out of business? There aren’t easy escape hatches written into these for the farmers who produce the beets. They could well be caught with beets in the ground when the processor goes belly-up. This could mean a crop year denied to the farmer to plant a replacement crop.
Add to that that the price of milk and beef would go up as cattle producers lose a cheap source of cattle feed when beet waste goes away.
Economists love these simplistic ideas of what happens when we knock down all tariffs and engage in “free trade.”
As the economy has shown since about 2002, their theories are not being borne out by the data. There is no huge economic benefit from “free trade.” Wage growth stagnated from 2003 onwards, and now we’re actually going down in wage growth. The only unequivocal outcome of the “free trade” movement has been that we have large and growing trade deficits that are resulting in the US economy no longer being able to generate jobs - except for people like, oh say, economists, who are employed by sticking their snouts into the taxpayer’s pockets - in this case, the taxpayers of Michigan.
The first thing conservatives should do when reading the twaddle coming out of any economist’s brain is to see from where do they generate their living. If they’re working for a think tank or a university, then find out if they have tenure.
If they have tenure, then we can safely disregard anything they have to say on the subject of “free markets” because they’re protected from anything remotely resembling a “free market.” It is nearly impossible to fire them for non-performance. This yahoo claims to be a “professor,” which I take to mean “full professor” which means he most likely has tenure.
I could care less if every American sugar farmer loses their job if the tariffs are removed. If they lose their jobs it is because they couldn’t get the job done. It would mean they were inadequate. AND I don’t care if other nations subsidize their sugar farmers either. I would rather get my sugar cheap from a foreigner than get it more expensively from an American.
Perhaps those that don’t like my attitude toward trade should be called a bunch of “Blue Eagle” fascists looking for another Great Depression.
I guess we should put a tariff on all imports???
Some undoubtedly -- probably several thousand. But think about almost $4 billion added to Americans' budgets. That's a lot of money.
We often talk about the "tax" on Americans by increased oil prices caused by problems in the Middle East. Well, the sugar tax is no less burdensome and it's just as easily reduced.
The government has no place in favoring one industry over another. The result is that some Americans are penalized to give an advantage to the others. That's a government policy that's pretty hard to defend. It's nothing but economic affirmative action.
We should stop engaging in the mental masturbation that we can hold our businesses to the rules of “free trade” agreements while allowing other countries to walk all over us, whether by direct violation of the agreement or by monetary policy that is gamed to support their exports to the US. eg, Japan has deliberately targeted the value of the yen three times recently to insure that their exports remain cheap in the US. China pegs their currency to the USD to insure that they’re always able to under-price US producers of any product the Chinese wish to export to the US.
If we want reality to reign supreme in trade, then we should ditch these idiotic multi-lateral trade “agreements” that are passed by legislation and executive fiat (when in fact, they should be subject to the same level of Congressional approval as a treaty, because these trade agreements are being used to trump domestic law and policy) and start enacting bi-lateral trade agreements with every country with whom we wish to trade. This way, if they choose to not abide by the terms of the agreement, then we can either dissolve the agreement or write in clauses for orderly reflexive counter-action to their violations instead of taking these issues up with the WTO or some other extra-national body.
How about the fact that nations don't trade with nations. People trade with people. And if I engage in trade with a Chinese company, I do so because it benefits me (and, presumably, the trade benefits him.) I do not need Congress to tell me with whom I may freely do business.
It's none of the Federal Government's damned business. The government-regulated trade advocates think they know what is best for the common good. Lenin did, too.
The problem with this type of analysis is that it results in what we have now: The economy is unable to generate jobs. Why? Because so much of the economic activity of actually creating wealth is happening outside the US, thanks to our trade policies.
Well, there’s a little problem with that. When the only thing on which we focus is how cheaply someone can buy something, rather than worry about who will have any money to pay for anything, sooner or later we discover (as we are since 2009) that jobs & wages don’t come back.
There’s a reason why we have an unprecedented number of people who are pulling down hundreds of billions of dollars in transfer payments - because the US economy isn’t producing prior levels of wealth, aside from rent-seeking thimbleriggers on Wall Street and their step-n-fetchits in DC. Trade deficits aren’t funny money. They’re made out of real money. That’s wealth that is leaving the US economy and being exported to other countries. Economists have ignored the effects of these huge, systemic imbalances in trade models for decades... claiming that the money will come back in investments, blah, blah, blah... which assumed that the US dollar and US debt markets would remain attractive places to invest when our economy hollowed out. In an ongoing theatre of dark irony, economists are “surprised” at the “unexpected” poor economic results in their macro models of what the US economy should be generating for wages and jobs.
Only economists could be surprised. To anyone who has been tallying up how many companies, products, technologies and economic sectors have been sent off-shore, it comes as no surprise.
Quite frankly, there’s huge and growing problems with the entire field of economics. Their models of how macro-economics works are clearly broken, irretrievably so. They have no predictive skill, and as such I’d be highly suspect of any predictions of consumer benefit economists make. Their models didn’t predict the recent recession. Their models said that the housing implosion would be “contained.” Once their models and data showed that we were in fact in a recession, their models said that job growth would be roaring back by a year ago. Their models said that unemployment would peak at just a bit over 8% by passing the stimulus. Their models didn’t predict the level of price declines in either the national housing markets, or regional markets.
Two Nobel-winning economists rode their predictions on sovereign debt issues down into the ground in the Long Term Capital Management debacle, which, BTW, set the stage for the Wall Street bailouts of 2008 until now.
Shall I go on with their predictions?
The favorite word in news stories surrounding economic news is “unexpected.” Why would anyone be gullible enough to see the abysmal track record of macro-economic predictions and yet believe an economist when he tells you that the American consumer will benefit by “$X amount of money...?”
One more thing:
You said “...the sugar tax is no less burdensome and it’s just as easily reduced.”
The economy doesn’t run on sugar, and it has limited knock-on effects to the US economy. Trying to compare the two is utterly silly. Without oil, we couldn’t fight wars. F-15E’s don’t take to the sky on Dr. Pepper made with real sugar.
I you care to, I’d suggest you read the US Constitution. The document spells out that yes, it IS the business of the government. Article I, Section 8, Clause 1.
If you don’t like the way the US Constitution was written, I’d suggest you move to China. Eliminate the entire nation-state business of flagging vessels which bring you those goods, which, BTW, involves more tariffs and treaties.
“If you care to...”
Nation states and flags are such a dated concept when it comes to ships. What matters is who has the pink slip.
You have some nerve talking about rent-seekers when some of the biggest rent-seekers in the United States are our sugar producers. LOL
Let's set aside how many jobs could be created if the four billion dollars was spent elsewhere, because we cannot see past our noses.
I heard somewhere the Hershey has been threatening to move all production to China, if the dominance of the American sugar lobby continues to control our trade agreements regarding imported sugar. Given the facts, who could blame them if it happens.
I think it was our first President, George Washington, who said it made no economic sense for Americans to pay more buying something made or produced here if we could pay much less getting it from somewhere else.
It deos not make us more efficient as an economy. On an indiviual level, it does not allocate our own expense where we profit the most from that expense.
Even he understood back then that the money we save will be spent, or put into use, somewhere else IN the economy.
Those domestic American manufacturers whose “raw materials” come from things produced in our steal and other metals factories (like bicycles) have been complaining about this same issue, as it applies to tarrifs and import limits on foreign sources for what THEIR factory needs. One bicycle maker said he can compete with China, Japan or Korea on the labor and operating costs of production, but not on the materials going into production, because his domestic sources are not really competing on the global market, and our trade policies protect them from trying to compete. He said if he ever decided to move his factories to Asia would not be because he “couldn’t make it here”, but becasue here it cost him too much to get what he needed to make it.
No, an economy is not a zero sum game, and wherever someone here gains, someone else bere may lose. But in the long run, it is not good to award inefficiency just for nationalistic sentiment.
I have no doubt that if our sugar import quotas ended, someone here in the U.S., maybe not among our current domestic sugar producers, would begin to find a way to produce sugar in American with an efficiency that is globally competitive.
So you’re going to try to claim that US sugar producers have made more money from exploiting regulatory niches than investment banks, mortgage securitization and so on?
Let’s say that this economist’s estimates are correct. That’s quite a leap of faith recently, but let’s stipulate it.
How much have US taxpayers paid for backstopping Fannie and Freddie paper in the last year, for bad paper that the banks offloaded onto the GSE’s? Hundreds of billions of dollars. 10X any amount of “excess” costs of sugar. And those costs will likely be well over $100B next year.
And an economist wants to get his silk panties in a wad about sugar? Holy crap, talk about misplaced priorities.
Do you also support equal levels of regulation for those foreign producers? Things like OSHA, EPA, EOC and so on.
Its much more complex than just the price of labor. In many countries its perfectly legal to use human feces for fertilizer.
Of course not.
“Sure, we can keep importing more and more illegal aliens and pay them 50 cents an hour more or less”
What the H%^$#@ do you think is being done in the domestic American sugar industry????
Yet, the wholesale price of domestic sugar is NOT derived as much from domestic labor costs in the industry as it is that they can get away with their higher wholesale price, because import tarrifs and quotas keep the available suppply down, protecting that price, not because it is impossible for it to be lower, doemstically, and not because it is impossible for domestic sugar producers to become more efficient than they are.
A portion of the higher prices for domestic sugar is money taken away from American manufacturers that use sugar, money they would gladly spend elsewhere in this economy if they did not have to pay those prices.
You sit here complaining about too many imports from other countries, while the artificially high sugar prices you are willing to support is going to lead, eventually, to finished product that use sugar that are now being made in Americs becoming products no longer made in America.
Hershey I know is one outfit that says that day is coming if the sugar quotas and tarriffs are not lowered.
“I can’t help but imagine the impact this specific issue would have if we found ourselves at war with China. How long would it take to get our act together to start producing these rare earth metals again from our own country, and would it be in time to prevent either defeat or massive loss of life?”
You are mixing up apples and oranges in your argument.
Sugar is not a rare commodity.
Sugar is not a strategic commodity in terms of our national defense.
Sugar, unlike many precious metals, we are fully capable of supplying for ourselves domestically, to ANY extent it is NECESSARY for us to do so.
That abaility does not REQUIRE us to restrict sugar imports the way we are. We will be fine with lower sugar import retrictions, economically and certainly strategically.
Keep the apples and oranges separate.
for crying out loud....such language here on FR...Now I have to windex my computer screen....(but you're right!)
I am really sorry but in your ignorance you ignore that that is not me “whining” but the owners and management of many manufacturing companies that KNOW that to be one of their biggest problems, that is THEIR position, and they ought to know.
It is fine that you understand that some companies are most beleaguered by many other problems, such as unions and regulations.
Your mistake is in using those additional problems as scapegoats and excuses for ignoring our problems, to domestic manufacturers, arising greatly on occasion from our own import restrictions. Ignoring that those issues exist and are real does not make them figments of the imagination of the manufacturers that report them.
“Hershey can kiss my ass if they leave. I couldn’t care less. That move will not come from raw material pricing.”
And just how is is that you are more informed about their industry and their own busimess than they are??
Grow and/or use stevia. Sweet, herb, zero calories, no glycemic impact.
“If I would see the benefit at the consumption level, I could be more for it, but that is not the result I’ve witnessed in my lifetime.”
That is another one of your statements demonstrating a disdain for any financial benefit that is not a benefit demonstrated in the retail consumer price. You have directly complained about an improvement in cost going to investors dividends, and executive compensation instead of a lower price to you.
You’ve never run a company built on capital others have taken the risk to invest.
By your logic a business whose largest problem, in comparison with their competitors, is in attracting new capital for improving the business, and you would have them go ahead and fail to do that, by raising their divdends, and give it all to you in a lower grocery store price, down from a price that is already the lowest in the market.
Your biggest failure is your disrgard for the business as a consumer, who is as entitled as you are to look for the “best price” and to complain when it is “excessive regulation” that is keeping him from getting it.
“The number one reason Hershey wants to leave is the cost of labor.”
Your ignorance of the facts is showing.
Your denial of reality is saddening.
“Neither are rare earth metals in reality. Overzealous environmental regulations along with the disparity in labor costs once again makes this an apt comparison.”
Sorry, more ignorance from you with more use of some problems to explain away others you disagree are really problems or problems you want to ignore.
While there are SOME “rare earth metals” where environmental regulations, in the U.S. are a problem, and not known supply and reserves, there are OTHERS where the supply and reserves, and where in the world they are known to exist, at strategic quantities, IS AN ISSUE, IS THE ISSUE, that no amount of improvement in our domestic regulations or labor costs can fix.
Sugar is not in the same situation and cannot be.
That is still only a $0.05 candy.
You could get two of them for the value of a silver dime.
“I would beg to differ. An Army functions best with well fed and relatively happy soldiers. That is a truism that cannot easily be dismissed, and sugar is a very important ingredient that cannot easily be replaced.”
The crystaline form of sugar, from sugar cane and sugar beets, the kind of sugar you get in a bag or box at the grocery store IS NOT STRATEGIC, as many substitutes can and are produced and used - substitutes such as “high fructose corn syrup”, for instance; substances that when ingested provide the same “sweetening” and when metabolised provide the same nurtitional benefit - when crystaline sugar is unavailable, or when it is too costly, or when it is undesireable for production reasons.
Sugar, from sugar cane or sugar beets, is NOT a strategic commodity.
Again, you place sugar on the lofty plain of strategic materials - where it does not belong.
Under your whims, in favor of protectist tarriffs (which I can see you wishing were higher and broader than they are), more American companies would leave this country in order to avoid the restrictions our import tarrifs were making on the goods they needed for production than would those companies that simply closed due to foreign competition.
And that dime will still buy a gallon of gas.
I don't care what sort of panties you wear. And subsidizing sugar producers to the tune of $4B per year is not ok because of the shenanigans that occur in the financial services industry. Why would you even bring that up, unless you understand that you are skating on thin ice?