The latest example of Big Sugar running to Uncle Sugar to protect the industry’s sweet deal at the expense of taxpayers and consumers occurred on March 28, 2014, when domestic sugar producers filed complaints about Mexican sugar imports to the U.S. International Trade Commission (ITC) and the Department of Commerce (DOC). The petitioners claim that Mexican sugar is being dumped in the U.S. market and receives unfair subsidies from the Mexican government, thereby injuring U.S. sugar producers.
While the agencies have agreed to investigate the two complaints, which is a routine decision in such cases, it would be an insult on top of injury to both taxpayers and consumers if they rule in favor of Big Sugar.
As a signatory to the North American Free Trade Agreement (NAFTA), Mexico now has open access to the U.S. market. NAFTA has led to an integrated sweetener market under which Mexico exports sugar to and imports high fructose corn syrup from the U.S. In fact, the current system is precisely what was anticipated by both countries when the agreement was ratified in 1994. But Big Sugar’s filings with the ITC and DOC threaten to disrupt this balanced market, since Mexico is likely to retaliate if the agencies rule in favor of the U.S. sugar producers.
While the federal government has been supporting sugar beet and sugar cane growers and processors for more than 75 years, the sugar program, which is comprised of the following combination of policies, has been particularly pernicious since the 2008 Farm Bill. That legislation increased loan rates for raw and refined sugar; continued a domestic allotment system; placed new restrictions on the ability of the secretary of Agriculture to allow imports even if they are needed to fill shortfalls in the U.S. sugar market; and created the federal Feedstock Flexibility Program, which requires the U.S. Department of Agriculture (USDA) to sell surplus sugar for ethanol production (an industry which receives its own federal subsidies) at a loss to the government. Despite the best efforts of taxpayer and consumer groups, amendments to mitigate the negative effects of the 2008 Farm Bill were defeated during consideration of the 2014 Farm Bill.
The sugar program has caused the price of sugar to be about 40 percent higher than the world price, resulting in increased costs to consumers of $3.5 billion annually in years 2009 through 2012. Thousands of jobs in sugar-using industries such as candy manufacturers have been lost. Finally, sugar producers forfeited $152 million worth of sugar to the USDA in September and October 2013. The Congressional Budget Office projects costs of $629 million between fiscal years 2014 and 2024, which demonstrates the continuing taxpayer costs of this ill-conceived sugar program.
When Big Sugar tries to solve their own problems by using trade laws as a weapon to intimidate America’s partner in a free trade agreement, they are playing with fire. Their blatant attempt to manipulate not only domestic agriculture policy but also the trading rules between the United States and Mexico should be emphatically rejected by both the ITC and the DOC. Otherwise, the heavily subsidized U.S. sugar industry will continue to leave a sour taste in the mouths of taxpayers and consumers.
Schatz is president of Citizens Against Government Waste.