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Zero-for-Zero Only Way to Get to Free Market Sugar

(June 18, 2013) – On June 12th, editor Erick Erickson hosted a forum to discuss U.S. sugar policy at the Newseum in Washington, DC. The panelists included former Rep. Jeff Landry (R-LA), Larry Hart, government affairs director for the American Conservative Union, and Ryan Weston, chairman of the American Sugar Alliance.

At the center of discussion was a proposal being referred to as the “Zero-for-Zero” strategy in which U.S. sugar producers would agree to zero out their government assistance programs in return for foreign nations zeroing out subsidies of their own sugar industries.

While conservatives have historically opposed government involvement in all free markets, Hart noted that “Sugar policy has always been a little different from the other agricultural programs the U.S. has, which are basically corporate welfare plans.”

“One of the misconceptions about the U.S. sugar program,” added Weston, “is that U.S. farmers get subsidies and money.”

Unlike other crop producers, sugar farmers receive no financial subsidies checks from American taxpayers, which is why it’s run at no taxpayer cost from 2002-2012.  Instead, sugar support is limited to the establishment of certain import quotas for foreign sugar and a two-tier tariff (tax) system on imported sugar (not including that which is exported by Mexico under NAFTA, which is duty free).

While some argue those policies nevertheless result in higher consumer costs, it is a fact that there are no taxpayer-funded subsidies going to sugar producers in the U.S. The same, however, can’t be said for other nations.

“There are over a hundred countries in the world that produce sugar,” explained Weston. “There are over a hundred counties in the world that have sugar programs of one type or another.”

Indeed, Brazil is known to heavily subsidize and support its sugar industry to the point of controlling, to a troubling extent, the entire worldwide sugar market today.

“OPEC (Organization of Petroleum Export Countries) control only 19% of oil,” Landry noted. “Brazil controls 50% of sugar.”

The fact that the United States is the largest importer of sugar, despite current import quotas, explains why this is such a concern of national interest…and why many believe any changes in domestic sugar policy absolutely must be accompanied by simultaneous changes in foreign agricultural policies.

“That’s why the sugar industry in the United States has long said the WTO (World Trade Organization) is the only place that can deal with all of these subsidies at one time,” argued Weston. “They’re the only one that can force other countries to get rid of their subsidies if we get rid of ours.”

Still, many longtime free-market conservatives maintain the U.S. sugar industry should be stripped of its tariff and quota protections and let domestic growers fend for themselves on the world market regardless of ongoing foreign subsidies. They argue that American consumers will benefit from lower prices for all manner of products made with sugar if the government’s current sugar policy is eliminated.

But the notion of cheap imported sugar is another misconception, as Weston explained.

“You can’t buy sugar from the world market and ship it here – with the cost of transportation – and get it here cheaper than you can buy it in the United States right now,” he said. “As a matter of fact, in Mexico and Canada the price of sugar is more expensive than it is here in the U.S.”

As for the claim by some that if U.S. food processors – such as candy makers – were able to buy cheaper world-market sugar they would pass the savings on to consumers; that’s simply not backed up by historical reality.

“In 1983,” Weston noted, “a candy bar cost 35 cents and there was 2 cents of sugar in that candy bar. Cane growers then received 22 cents a pound. Thirty years later a candy bar now costs $1.39. That’s a 300 percent increase in the cost of a candy bar. But the price a sugar cane grower is getting today is 19 cents a pound. That’s a decrease of 10 percent.”

Clearly the argument that consumers would automatically benefit from a complete elimination of U.S. sugar supports is extremely suspect.

So what’s a good free-market conservative to do about the reality of the global sugar market and U.S. policies? Is the Zero-for-Zero approach worth exploring and pursuing?

“If I was in academia,” Hart said, “I would probably be saying let’s just unilaterally eliminate all these different subsidies. But I’m in the arena. And I think when you’re in the arena you have to see how you can move forward towards what we want in a way that can succeed.”

Hart noted that world markets have “dramatically changed” over the last 20, 30, 40 years and “conservatives are basing their views on what the markets used to be.”

“We’ve been trying to get rid of these various subsidies and tariffs for many decades and we’ve gotten exactly nowhere,” concluded Hart. “So it’s time to try a new approach.” Hart said the Zero-for-Zero strategy was something conservatives “should take a good look at” after “many decades of arguing these policies.”

Added Weston, “It’s going to be hard. It’s going to take patience and perseverance. But if people really believe in a free sugar market, Zero-for-Zero is the only way to get there.”

Watch the Thought Leader interview in its entirety below…