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U.S. Sugar Program: We’ll Drop Ours if You Drop Yours

Opponents of the present U.S. sugar policy – which consists of import quotas and relatively mild tariffs, rather than direct farmer subsidies – are viewing the reality of the world market with blinders on.

Indeed, as the Wall Street Journal pointed out last week, Japan’s import tariffs on rice are as high as 778%, and overall “Japanese farmers rely on government support for 56% of their total receipts, compared with just 7% in the U.S.”

In a separate story, the Journal also noted that China has long imposed quotas on rice from other nations “to protect domestic producers and prevent the country from depending on imports” – especially from countries such as Vietnam and Thailand where rice is “some 10% cheaper than the cheapest Chinese varieties.”

In addition, China’s military recently warned against “rising corn imports” as “a way for the U.S. to threaten China’s food security.”

As you can see, other nations often don’t see agricultural import issues as simple marketplace matters, but matters of national security. As such, it would be extremely unwise, if not outright irresponsible, for the United States to unilaterally disarm by eliminating its own agricultural protections without simultaneous concessions from foreign nations.

Indeed, if the present U.S. sugar policy was gutted, it would be American candy, cake and cookie manufacturers who would be the biggest losers. That’s because the U.S. would be importing huge quantities of refined sugar to make up for the shortfall caused by putting domestic producers out of business.

And if candy manufacturers think buying a rail car load of domestic sugar from Florida or Louisiana is a pain, just wait until they have to figure out what to do with a barge-load from Brazil!

And let’s not forget what happened in the late 70’s when the U.S. sugar program was eliminated. The floodgates opened to imports just before a global shortage. As such, prices spiked to an all-time high and the sugar program was reinstated…at the request of candy companies!

More recently, Europeans suffered similar price spikes after it unilaterally opened its sugar market, putting its domestic sugar industry all but out of business.

This is the disaster awaiting countries that adopt free-market agricultural policies while competing with other nations that are artificially deflating global prices through direct government subsidies. When it comes to such market-manipulating policies, the U.S. position must continue to be: “We’ll drop ours only if you drop yours.”