Gerard Scimeca – Chairman, CASE
November 1, 2019
This month a handful of legislators in the House and Senate introduced a bill that calls for a major overhaul of America’s longstanding policy in support of U.S. farmers and America’s sugar industry. Unfortunately, their misguided proposal is absolutely the wrong “fix” in the midst of a global sugar battle, and would be a disaster for consumers, farmers, and numerous other segments of America’s economy.
Dubbed, the “Fair Sugar Policy Act of 2019,” Reps. Virginia Fox (R-NC) and Danny Davis (D-IL), along with Senators Pat Toomey (R-PA) and Jeanne Shaheen (D-NH) are pushing for what they call an end to “corporate welfare” for the U.S. sugar industry, and a return to the “free market” they claim will lead to lower prices for consumers and fewer burdens for taxpayers. Unfortunately, these characterizations of America’s current sugar policy are as false as their reform proposal is simplistic.
Most agree that sugar is by far the most distorted commodity in world trade, and what the bill’s sponsors fail to acknowledge what will happen to U.S. consumers should America adopt their proposal and allow billions of tons of below-market sugar to be dumped into our economy. This is precisely what nations who heavily subsidize their domestic sugar industries, including India, China, Indonesia, and Brazil, would love to see happen.
Sugar prices may go down initially for consumers, but American growers and U.S. factories will go belly-up as prices collapse. Supply will necessarily fluctuate wildly with the elimination of import quotas, meaning prices will destabilize and fluctuate as well. In time, of course, the market will flatten and foreign nations will be left dominating America’s sugar supply, free to set their own price through continued market and supply manipulations. The world has witnessed this phenomenon before, and we should steer clear of repeating this mistake at all costs.
What critics of America’s current policy fail to mention is that sugar prices in the U.S. are lower now than they were in 1980. And this very policy that has kept prices low while also protecting U.S. farmers receives not a penny of subsidies or “welfare,” regardless what its opponents say. The U.S. government makes available loans for sugar producers that are paid back with interest, which is far from a handout. Loans allow U.S. producers to compete in a hostile global sugar market, but leave their ultimate success to hard work and operating efficiency, not by floating on the back of taxpayers.
America’s current sugar policy is a targeted, commonsense restraint on the ability of other nations to control U.S. sugar and dominate our markets through predatory trade practices. It prevents the dumping of cheap, foreign-subsidized sugar from nations which have constructed import barriers to U.S. sugar, and puts the brakes on market manipulations which threaten U.S. farmers and domestic sugar producers. Dismantling this sound and time-tested policy for sounds-bites heralding non-existing “free-markets” is just bad policy and puts all consumers at risk.
If there is one area of agreement in Washington regarding the current debate is that all sides want a truly free-market global sugar industry, with the elimination of subsidies, quotas, tariffs, and trade barriers by all sides. The only way to achieve this, however, is if other nations agree to end predatory practices and protectionist policies toward their own domestic producers.
In advocating for this goal, CASE supports Rep. Ted Yoho’s (R-FL) “Zero-for-Zero” legislation that calls for an “end to the global sugar subsidy insanity” and proposes to adjust of U.S. sugar policy accordingly when other nations stop subsidizing their homegrown sugar. Washington should be standing up to predatory nations to protect American industry and consumers with policies embodied in Zero-for-Zero. The Fair Sugar Policy Act, by contrast, is the wrong solution that represents unilateral disarmament on a critical agricultural commodity that would be a sure path to disaster for American growers and producers, and lead to a sour end for consumers.
