Seventeen years ago, The Future of Freedom Foundation published my piece “The Great Sugar Shaft.” That article hammered federal sugar policy as one of the most brazen interventionist failures in American history. Unfortunately, the political looting of sugar consumers and food producers continues unabated.
Federal price supports and import quotas combine to drive U.S. sugar prices far above the world sugar price. American consumers pay more than $3 billion a year in higher prices thanks to the sugar program, according to the U.S. Commerce Department.
Federal sugar policy has a long, sordid history. In 1816, Congress imposed high tariffs on sugar imports in part to prop up the value of slaves in Louisiana. In 1832, a committee of Boston’s leaders issued a pamphlet denouncing sugar tariffs as a scam on millions of low-paid American workers to benefit fewer than 500 plantation owners. In the 1890s, Congress first abolished and then re-imposed the sugar tariff, spurring a boom-bust in Cuba that helped drag the United States into the Spanish-American War.
The sugar tariffs are perhaps America’s least efficient welfare program. In the 1980s, it was costing consumers $10 for each dollar of sugar growers’ income. The USDA ceased keeping track of sugar farmers’ income, but a University of Minnesota study estimated that sugar-beet farmers in that state lost an average of $300 per acre in 2013.
Despite lavish subsidies, the number of sugar growers has fallen by more than 40 percent in the past 30 years. The benefits of price supports and import quotas flow overwhelmingly to the largest producers. The General Accounting Office estimated in 1995 that 1 percent of sugar growers captured almost half of all the benefits from the program. At that time, sugar farmers were collecting a subsidy more than 30 times larger per acre than did wheat farmers. And sugar farmers continue to receive far more per plantation than the vast majority of subsidized farmers.
Candy and other food manufacturers are shifting production to foreign nations where sugar is much cheaper. The Commerce Department estimated that during the 1980s the number of jobs destroyed in food manufacturing and in sugar refining exceeded the total number of sugar farmers. A study by Agralytica, an economic consulting firm, estimated that the sugar program zapped more than 120,000 jobs since 1997. Nabisco recently shifted production of Oreo cookies to Mexico to capitalize on much lower sugar prices there.
The Wall Street Journal noted, “Total U.S. confectionary-manufacturing employment sank 22% to about 55,000 jobs in 2011 from 1998…. The number of industry manufacturing locations fell 7.7% to about 1,600 in the same period. Three candy-making jobs are lost for each sugar-growing and processing job saved by higher sugar prices, according to a Commerce Department report in 2006.” Many food-manufacturing jobs have fled to Canada. Sugar is cheaper in Canada than in the United States, primarily because Canada has almost no sugar growers and thus no trade restrictions or government-support programs.
The U.S. sugar program has perennially sabotaged the effectiveness of U.S. foreign aid. The Reagan administration trumpeted its Caribbean Basin Initiative — and then slashed the amount of sugar that Caribbean nations could sell to Americans, even though Caribbean producers have huge natural advantages and lower labor costs compared with U.S. farmers. U.S. barriers on sugar imports sabotage the credibility of U.S. government efforts to sway foreign governments to drop their trade barriers against American exports.
Because the U.S. mainland does not have a natural climate for sugar production, farmers compensate by dousing the land with chemicals to artificially stimulate production. More than 500,000 acres of the Everglades have been converted from swamp land to sugar fields. Over the years, phosphorous from the fertilizer used by sugar growers leached into the water of the Everglades and helped destroy the eco-system of the entire region. Politicians have trumpeted several hugely expensive “compromises” to curb the environmental harm but, as a New York Times 2010 exposé showed, the main beneficiary was The United States Sugar Corporation, not the Everglades. The Times noted, “United States Sugar dictated many of the terms of the deal as state officials repeatedly made decisions against the immediate needs of the Everglades and the interests of taxpayers, an examination of thousands of state e-mail messages and records and more than 60 interviews showed.”
The history of the sugar program offers perennial confirmation of H.L. Mencken’s adage that every election is an “advanced auction of stolen goods.” Congress shafts consumers because the sugar industry has donated more than $40 million to politicians since 1990. Reason magazine, summarizing a 2014 Heritage Foundation report, noted that “while sugar constitutes just 2 percent of the total value of U.S. crop production, the nation’s sugar farmers account for 35 percent of the crop industry’s total campaign contributions and 40 percent of its lobbying expenditures.” Congress repays the favor by conferring a license to pilfer consumers at grocery checkouts. The economic arguments offered in defense of the program are merely camouflage for political plunder.
Sen. Marco Rubio (R-Fla.), a Republican presidential candidate, is one of the biggest champions of the sugar program. At a forum in July, Rubio urged that the federal sugar program be perpetuated as long as any foreign government provides aid to their sugar growers. This goes to the heart of the defense of so many current U.S.-trade barriers and is worth examining.
Folly
The folly of holding consumers hostage to foreign governments has been obvious for hundreds of years. John Taylor of Virginia, in a fiery 1821 book entitled Tyranny Unmasked, declared, “All monopolies and exclusive privileges [for protecting domestic manufacturers] have succeeded by using the same argument. It is invariably condensed in the single word ‘reciprocity.’… It would be exactly the case of a pacific war, in which the nations should make laws that neither should attack the other, but that each should shed at home a reciprocal portion of its own blood.”
Protectionists have for centuries warned that the United States must maintain its tariffs and other import barriers in defense against foreign government policies. But if your neighbor beats his wife, you don’t “teach him a lesson” by beating your wife. How can a restriction on freedom in one nation justify a corresponding reduction of freedom in another country? If foreign governments effectively lock up their consumers, is the U.S. government obliged to lock up American consumers?
Rubio says that the United States should negotiate with other nations to end their sugar subsidies. Bargaining with foreign countries over trade policies makes as much sense as bargaining with foreign health authorities before agreeing to clean up mosquito-infested swamps in Louisiana, or demanding concessions from a foreign government before removing the rocks on a Colorado highway after an avalanche. The reciprocal approach to reduction of trade barriers is similar to an alcoholic who promises to go “on the wagon” — but only after all other alcoholics formally agree to go on the wagon.
The case against unilateral free trade is simply the case against unilateral adjustment — that the United States should not do what it does best until foreign nations agree to do what they do best. Every trade barrier seeks to redirect capital and labor from relatively more-productive uses to relatively less productive ones. Early American protectionists clearly realized this principle and justified it by insisting that protection would be temporary — lasting only long enough to get a new industry’s feet on the ground — after which consumers would pay lower prices. After 200 years of protection for sugar, maybe it is time to stop giving America’s laggards the benefit of the doubt.
Reciprocity is the core of the intellectual fraud of American protectionism. For most of American history, “reciprocity” has been largely a fig leaf of moral respectability for American protectionists — claiming that they are shafting American consumers in order to teach foreigners a lesson. Reciprocity is based on the idea that two trade barriers are always better than one. Reciprocity means finding foreign pretexts to forcibly redistribute income among Americans.
The United States should not allow its spite at foreign governments’ foolish policies to continue diverting it from its citizens’ self-interest.
Food manufacturers, environmental groups, and free-market activist groups are leading another assault on the program. When Congress re-authorized farm programs in 2013, the sugar program came under intense fire but survived. A coalition of congressmen is now pushing a bill to curb the program’s exactions. This is a first step but any reform short of abolishing the program risks being reversed.
The history of federal sugar policy is a stark rebuttal to anyone who expects sagacious economic policy from Congress. Since the 1830s, sagacious analyses have shown that the program costs the nation far more than it benefits producers — and that the number of victims is thousands of times greater than the beneficiaries. But economic logic cannot buy any congressional seats. And neither analysis nor hard facts can sway politicians from continuing to shaft the nation to fill their campaign coffers.
America would be more prosperous if the government weren’t subsidizing even a single sugar beet or sugar cane. Bankrolling sugar production in Florida makes as little sense as a subsidy program to grow bananas in Massachusetts. At a time when detox diets are all the rage, abolishing the sugar program is a first step to detoxifying Washington.
This article was originally published in the November 2015 edition of Future of Freedom.