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A new, consensus approach to sugar subsidy reform

(Chuck Muth) – Republicans in the House of Representatives and Democrats in the Senate didn’t agree on much during the farm bill debate, but both bodies clearly sided with the powerful U.S. sugar lobby when it came to the continuation of U.S. sugar tariffs and quotas.

That means sugar probably won’t be coming up in the joint House-Senate conference committee, and sugar policy will continue unchanged.

This shouldn’t shock anyone. There have been four votes since last June to gut the U.S. sugar program, and each vote turned out the same way sugar votes have gone for three decades – in Big Sugar’s favor.

For those of us who are reform minded free-market advocates, it’s time to try a new approach that actually has a chance of passing.

The sugar lobby says they wouldn’t need sugar tariffs or quotas if it weren’t for foreign subsidies. They claim to be efficient by world standards and supportive of a true free market.

And they’ve convinced lawmakers that to unilaterally disarm before foreign subsidies are addressed would do nothing to advance a free market, while jeopardizing America’s ability to grow a key commodity.

Maybe its time to make them prove it by shifting focus to eradicating the subsidies in Brazil, Mexico, India and Thailand that are artificially manipulating the global market and harming consumers with unpredictable volatility.

Take Brazil, for example. With a 50 percent share of the sugar export market, no country manipulates prices like Brazil. And with $2.5 billion in sugar subsidies a year – plus another $500 million in recently announced government handouts – no country is as poised for government-dictated expansion and further market control.

Then there’s Mexico, which has become a major sugar player in North America. The Mexican government directly owns and operates one-fifth of that nation’s sugar industry, producing more than 1 million tons a year.

The government’s sugar floods into the United States through a NAFTA loophole to boost Mexican prices and harm the U.S. competition.

Both countries’ policies are as indefensible as America’s, but they aren’t alone. More than 100 countries produce sugar and every one of them has trade-distorting subsidies of some kind in place.

Rep. Ted Yoho, R-Fla., has introduced worldwide sugar policy reform legislation known as the zero-for-zero policy, which is quickly picking up steam on the Hill.

Under Yoho’s approach, U.S. trade negotiators would make foreign sugar subsidies a priority, agreeing to roll back U.S. policy in exchange for similar concessions abroad.

It has been called a subsidy cease-fire and it is the only way to achieve an actual free market where all major producers will compete as businesses, not government-controlled enterprises.

U.S. sugar producers have publicly endorsed the Yoho approach, as have many conservative groups that have long opposed current U.S. policy.

Together, we might be able to make progress in fixing the world’s most distorted commodity market and getting rid of those cumbersome U.S. tariffs once and for all.

(This column was originally published in the Washington Examiner on September 28, 2013.)