Gerard Scimeca – Chairman, CASE
June 3 2020
Amid the maelstrom of the coronavirus pandemic, America’s farmers are beyond essential, ensuring that the food supply is stable and plentiful.
But policies in place threaten at least one key sector of farming in the Upper Midwest even as the nation increasingly relies on it during the crisis.
The prime example are America’s sugar farmers, whose crop is a fundamental ingredient across many products on grocery store shelves. When it comes to global competition, sugar farmers are at huge disadvantage because they battle against competitors powered into success by massive subsidization.
That unfair competition makes it exceedingly difficult for sugar farmers and the 120,000 jobs they support in states like Idaho, Louisiana, California, Minnesota, North Dakota and Michigan.
A report last year by researchers at Texas Tech University found that “government intervention in the world sugar market remains extreme and widespread with a wide variety of measures to support domestic sugar producers.”
Due to subsidization, there is a continuing cycle of distorted prices and alternating supply gluts and shortages for consumers that sows uncertainty for farmers. This has led to a subsidy war where the cost of producing sugar is twice that of the average price on the world market.
The report noted the highly protectionist and predatory tactics of the world’s top sugar exporting nations, including Brazil’s $2.5 billion and India’s $1.7 billion in annual subsidies to their domestic sugar industries to undercut competitors.
Other nations singled out in the report include Thailand, Mexico, China, Japan, Canada and the European Union. This is in addition to other protectionist tactics employed, including import tariffs, loan forgiveness, price controls and direct payments to producers for equipment and supplies.
It stands to reason that the predatory tactics will become even more pronounced after the pandemic subsides and foreign government seek to buttress their sugar farmers as they recover from the crisis.
Brazil controls nearly half of global sugar exports through its subsidies, while India is also among the chief offenders, propping up its growers through a complex web of export subsidies, trade barriers, no-interest loans and debt forgiveness.
The U.S. sugar industry is not subsidized, but the U.S. government’s response to the foreign subsidies is interest-bearing loans to U.S. farmers, and import quotas to protect U.S. consumers and farmers from a glut of subsidized sugar.
“The sugar market is the most volatile commodity market in the world,” the group Americans for Limited Government aptly stated. “America’s sugar farmers compete, unfairly, against heavily subsidized foreign producers, justifying the current no-cost, U.S. sugar policy program to stabilize the domestic sugar market.”
U.S. policymakers must change their approach.
The answer is something akin to a proposal from Rep. Ted Yoho (R-Fla.) titled the “Zero-for-Zero” policy, which would eliminate U.S. sugar quotas in exchange for the end of foreign subsidies across the board. Zero-for-Zero is a free-market solution that removes corruption from the world sugar market and allows prices to be based on true production costs and a level playing field.
But until global sugar subsidies are eliminated, U.S. sugar farmers will forever be on precarious financial footing, even as we call upon them to help fill the grocery store shelves in this time of national crisis.
