Thank Uncle Sam for Looming Sugar Shortage

According to Inside U.S. Trade ($), an alliance of sugar-using industries sent a letter earlier today to Secretary of Agriculture Tom Vilsack asking for an increase in the quotas imposed on imported sugar. The organizations signing the letter complain, quite reasonably, that domestic sugar stocks have fallen to historic lows and that a potential shortage would jeopardize production and jobs in their sectors.

Here’s the letter, dated August 7, 2009:

Dear Mr. Secretary:

The organizations and companies below urge you to increase the sugar import quota immediately. Your experts forecast unprecedented shortages without prompt action. According to USDA’s “World Agricultural Supply and Demand Estimates,” the United States will end the next fiscal year with less than 13 days’ worth of sugar on hand, unless imports are increased. If this forecast is accurate, our nation will virtually run out of sugar.

The shortage does not have to happen. The only reason markets are forecast to be so tight is the restrictive U.S. policy on sugar imports. Imports are subject to restrictive quotas. But you have the authority to increase the sugar import quota, and we urge you to do so immediately, both for the current fiscal year — where high prices already indicate a painfully tight market — and for the upcoming year.

Without a quota increase, consumers will pay higher prices, food manufacturing jobs will be at risk and trading patterns will be distorted. Please act now in the interest of all Americans.

The letter was signed by, among other organizations and companies, the American Bakers Association, the American Beverage Association, General Mills, Gonella Frozen Products, the Grocery Manufacturers Association, the Hershey Company, the Independent Bakers Association, the International Dairy Foods Association, Kraft Foods, Krispy Kreme, Mars, the National Confectioners Association, Nestle USA, and Pepperidge Farm.

Protectionism is not just a consumer issue. As we elaborated in a 2005 Cato study on the high cost of U.S. farm programs (see pp. 4-6), trade barriers against agricultural commodities such as sugar also raise costs for U.S. producers, forcing them to raise prices, and thus reducing sales, output, and employment. Artificially high domestic sugar prices have forced thousands of domestic manufacturing jobs to be “shipped overseas” to countries that allow sugar to be imported at world prices.

If the Obama administration wants to encourage the domestic production of sugar-containing products, it should raise the quotas as far as they can and allow American companies to buy sugar at world prices.