Tag: sugar

Sugar from Mexico: Who’s Being Injured?

On March 28, 2014, the U.S. sugar industry filed antidumping and countervailing duty (AD/CVD) petitions against imports of sugar from Mexico.  From the time that NAFTA’s sugar provisions were fully implemented in 2008, Mexico has been the only country in the world with unfettered access to the U.S. sugar market.  Sugar interests now are hoping to clamp the fetters back on.  It is not at all clear whether that effort will succeed.

Both the Commerce Department and the U.S. International Trade Commission (ITC) play important roles in this process.  Commerce must determine the extent of any dumping margin (selling at “less than fair value” due to pricing practices of individual firms) and any countervailing duty margin (benefit received by Mexican exporters from subsidies provided by their government).  The estimated dumping margins for the preliminary phase of the investigation range from 30 to 64 percent; they are likely to be adjusted based on additional information gained in the final phase of the investigation.  Commerce has not yet had an opportunity to establish CVD margins.  Given the degree of government involvement in Mexico’s sugar business, a CVD margin at some level seems likely.

The job of the ITC is to determine whether the domestic sugar industry has been “injured” by the imported sugar.  In its preliminary determination, the commission voted unanimously in the affirmative, which means that the investigation will go forward into its final phase.  This vote was not at all a surprise.  The legal standard for a negative vote in a preliminary determination is quite high.  To have voted in the negative, the ITC would have had to conclude that there was no “reasonable indication that a domestic industry is materially injured or threatened with material injury.”  That is a very difficult standard to meet on the basis of the somewhat limited preliminary record – often with inconclusive evidence – that must be compiled not more than 45 days after the case has been filed. 

What About “Zero-for-$3 billion-a-Year”?

That’s about how much the U.S. economy would gain from removing all sugar price supports and trade barriers right now.

But the sugar lobby, and their supporters in Congress and, sadly (not to mention confusingly), some conservative groups, are pushing a “Zero-for-Zero” sugar policy, which would essentially end U.S. sugar support programs only when other sugar-producing countries do the same. Seton Motley, president of Less Government puts it this way in an article for the Daily Caller:

It’s called zero-for-zero. Where we approach the planet and say “You get rid of your trade barriers, and we’ll get rid of ours.” In other words, we have zero protectionism — and so does everyone else. Right now, it’s being proposed for sugar…

“Consider that there are more than 100 sugar producing countries worldwide, and there are also basically 100 different sugar policies, each of which includes various forms of government intervention,” [a supply-chain management researcher in a recent study] continues. “[A] free market approach rewards the best and most efficient business people and not the most heavily subsidized producer,…[zero for zero] could stabilize domestic and ultimately world market sugar prices … [Getting] government out of markets creates free markets, and free markets lead to free and fair markets, and that, in the final analysis, is where world sugar needs to be.”

Well sure it does. The question is: what should the United States do while we are waiting for this nirvana to materialise, a process that would be very lengthy indeed? I would suggest that doing ourselves a favour and abandoning the terrible U.S. sugar policy—costing the economy billions of dollars a year through artificially high sugar prices and, now, government sugar purchases—is a good start. Let other countries distort their markets and subsidise sugar importers’ consumption, as is their wont. We don’t have to follow them, and American consumers and businesses would benefit from a freer domestic market in sugar.

Big Sugar Tries to Protect Its Sweet Deal from “Big Candy”

We’ve written about the outrageous sugar import quotas here many times. And Chris Edwards wrote in March about the American Sugar Alliance’s ad in the Washington Post titled “Big Candy’s Greed.” But we couldn’t link to the ad because for some reason the American Sugar Alliance has not chosen to put a version of the ad on its website. But the Alliance ran its expensive quarter-page ad in the Post last week, so we’re now able to provide the public service of making it available online.

Note that what candy producers and other sugar users want is to be allowed to buy sugar from the world’s most efficient producers at world market prices—just like every company in a free market. This protectionist nonsense “Big Candy” is fighting has been going on for decades. In 1985, the Wall Street Journal and then the New York Times reported that the Reagan administration had slapped emergency quotas on “edible preparations” such as jams, candies, and glazes—and even imported frozen pizzas from Israel—lest American companies import such products for the purpose of extracting the sugar from them. Apparently it might have been cheaper to import pizzas, squeeze the tiny amount of sugar out of them, and throw away the rest of the pizza than to buy sugar at U.S. producers’ protected prices.

As Chris Edwards noted, a critic of Big Sugar quoted in this article summarized the sad reality of sugar growers: “They are unlike any other industry in Florida in that they aren’t in the agricultural business, they are in the corporate welfare business.” 

Please enjoy “Big Candy’s Greed,” brought to you by the coddled, protected, price-supported, politically active U.S. sugar industry:

Big Sugar Ad

Judge Strikes Down Bloomberg’s Soda Grab

My new op-ed at the Daily Caller is their “most shared” this morning. Excerpt:

On Monday, Judge Tingling struck down the soda ban in a sweeping opinion that does everything but hand Mayor Poppins his umbrella and carpetbag. This wasn’t just a temporary restraining order putting the regulation on hold for a few weeks. The judge struck down the ban permanently both on the merits (“fraught with arbitrary and capricious consequences”) and as overstepping the rightful legal powers of the New York City Department of Health…

[For] the mayor and his public health crew… the biggest reproach in the decision isn’t in being found to have gotten the facts wrong, it’s being found to have violated the law.

And if anyone is expected to know and play by the rules, it’s a nanny.

Michael Grynbaum, New York Times: 

[Bloomberg’s] administration seemed caught off guard by the decision. Before the judge ruled, the mayor had called for the soda limits to be adopted by cities around the globe; he now faces the possibility that one of his most cherished endeavors will not come to fruition before he leaves office, if ever. …

The measure was already broadly unpopular: In a New York Times poll conducted last August, 60 percent of city residents said it was a bad idea for the Bloomberg administration to pass the limits. 

The Times also profiles Judge Tingling and reports on reactions by the New Yorker in the street (not favorable toward the ban). Coverage from yesterday, including my podcast with Cato’s Caleb Brown, here. [cross-posted and slightly condensed from Overlawyered]

Easter Bunny’s Burden

From Pennsylvania, bad news for chocolate lovers:

The Hershey Company says it is raising wholesale prices by 9.7% on most of its candy products. The maker of Reese’s, Kit Kat, Hershey’s Kisses and Twizzlers cited increased costs for raw materials, fuel, utilities and transportation.

The costs of two key raw materials—sugar and dairy products—are artificially inflated by federal government policies, the effect of which is to harm U.S. consumers and U.S. food producers, such as Hershey.

Senator Richard Lugar has introduced legislation to reform U.S. sugar policies. His timing is good, as world food prices are rising and some experts predict that sugar prices will soar in coming years.

The best ways to combat rising food prices—which particular harm people with moderate incomes—are free markets, open international trade, and vigorous competition. Unfortunately, those pro-growth and progressive policies are absent in the U.S. dairy and sugar industries, which are subject to Soviet-style central planning. (See here and here).

A consultant study last year (not commissioned by Hershey) indicated that high corporate taxes are also a negative with respect to Hershey’s U.S. production:

The Hershey Co. will be driven to shift more Pennsylvania manufacturing jobs overseas because of artificially high sugar prices in the U.S. market and the state’s high corporate tax rate, according to a new industry cost study by The Boyd Co.

In an interview, Boyd Co. CEO John Boyd Jr. speculated that Hershey would acquire additional overseas plant capacity through its intended acquisitions in foreign markets and then shift production from its North American plants to lower-cost countries and markets.

A key part of this shift will be to avoid markedly higher sugar prices under U.S. protectionary tariffs and quotas, Boyd said. Candy companies with operations in the U.S. pay about 21 cents a pound for sugar, compared to about 9 cents a pound on the world market

Politicians talk endlessly about jobs, jobs, jobs. But job creation is thwarted in the U.S. food and candy industries by government protectionism, taxes and regulations.

I don’t know the Easter Bunny’s political views, but I bet he would support Senator Lugar’s “Free Sugar Act” to generate more chocolate-making jobs in America.

Lugar Targets Federal Sugar Racket

The federal government has been meddling with sugar production since 1934. Today’s convoluted system of supply controls, price supports, and trade restrictions benefits domestic sugar producers at the expense of consumers and utilizing industries. In other words, sugar producers “win” and the rest of the country “loses.”

Sen. Richard Lugar (R-IN) just introduced the “Free Sugar Act of 2011,” which would abolish the federal sugar racket. In a Washington Times op-ed on his bill, Lugar doesn’t pull any punches:

The collapse of communism brought an end to many of the world’s command-and-control economic systems and central planning by government bureaucrats. But a notable exception is the United States government’s sugar program. A complicated system of marketing allotments, price supports, purchase guarantees, quotas and tariffs that only a Soviet apparatchik could love, the U.S. sugar program has actually lasted longer than the Soviet Union itself.

A Cato essay on agricultural regulations and trade barriers elaborates on points Lugar makes in his op-ed:

  • The big losers from federal sugar programs are U.S. consumers. The Government Accountability Office estimates that U.S. sugar policies cost American consumers almost $2 billion annually. (Lugar says it could be as much as $4 billion.)
  • The GAO found that 42 percent of all sugar subsidies go to just 1 percent of sugar growers. To protect their monopolies, many sugar growers, such as the Fanjul family of Florida, have become influential campaign supporters of many key members of Congress.
  • U.S. food industries that buy sugar are harmed by current sugar policies as well. The employment in U.S. sugar growing is 61,000, which compares to employment in U.S. businesses that use sugar of 988,000.  According to a government report, for each sugar growing and harvesting job saved through high U.S. sugar prices, nearly three confectionery manufacturing jobs are lost.
  • Numerous U.S. food manufacturers have relocated to Canada where sugar prices are less than half of U.S. prices and to Mexico where prices are two-thirds of U.S. levels.

The federal government engages in a lot activities that are difficult to defend. But when it comes to sugar, the government’s protections are clearly indefensible.