Sugar subsidies cost U.S. jobs

September 4, 2002

Free Market Foundation

U.S. subsidies to sugar growers are bad policy and bad economics, observers say. The loan guarantees that Washington gives growers cost consumers $2 billion a year and are now driving manufacturing jobs out of the country.

Kraft Foods is moving Life Savers production to Canada costing 600 jobs because Canada doesn’t prop up prices to protect a handful of domestic sugar growers.

Kraft’s Montreal plant pays just over half of the U.S. price for sugar, leading to an annual savings of nearly $10m.

Brach’s Confections is shutting down a Chicago plant, throwing 1,100 out of work.

Ferrara candy’s expansion is focusing on new plants in Canada, Mexico and other foreign locations.

For years, Washington has given the industry low-interest loans and curbed imports of foreign sugar. When the growers default on the loans, the government has to accept repayment in sugar.

Two years ago, processors dumped $400 million worth of sugar on the government and just storing it cost taxpayers $1 million a month.

The Congressional Budget Office estimates defaults on sugar loans could cost $800 million during the next 10 years.

The new 10-year, $200 billion farm bill, repeals a requirement that sugar producers who default on their loans pay a modest forfeiture penalty costing the Treasury $500 million.

Since 1990, sugar growers have contributed more than $18 million to political campaigns. They don’t include just sugar cane growers in, but sugar-beet growers across the Midwest and West and corn growers as well. Artificially high prices for sugar create a market for corn syrup as a substitute in products ranging from soft drinks to bakery products.

Source: Editorial, Sugar Lobby’s Clout Threatens Economic Decay, USA Today, August 19, 2002.

For text http://www.usatoday.com/news/opinion/editorials/2002-08-15-edit_x.htm
For more on Agriculture Subsidies http://www.ncpa.org/iss/bud

FMF Policy Bulletin\27 August 2002