By Rick Manning
Trade policy discussions often end up in debates between perceived winners and losers with big businesses anxious to enter new markets pushing for “free trade” and protectionists arguing to restrict foreign made products into the country.
Agricultural trade policy is dramatically murkier with debates about foreign government subsidies and the impact those giveaways have on the domestic farmers. And when it gets to sugar, these arguments get even stickier still.
A new study authored by Institute for Policy Innovation president Tom Giovanetti clearly delineates the challenges facing the United States domestic sugar industry due to the massive subsidies received by producers in the four countries that export 40 of the 58 million tons of sugar shipped each year.
Giovanetti writes, “In a reasonably free global sugar market, the United States can compete in sugar. Achieving such a market should be the goal of U.S. policy, rather than simply allowing otherwise viable domestic U.S. sugar producers to be driven out of business by practices that, in the long term, are not in the best interests of either U.S. producers or consumers.”
Mexico’s dumping of heavily subsidized sugar into the United States has become so alarming that the U.S. International Trade Commission voted unanimously last month to investigate whether it violates U.S. Trade Law.
And, with the soccer World Cup spotlight on Brazil, most don’t realize that the South American nation dominates the global sugar market controlling more than 50 percent of all exports. The report points out that Brazil alone spends $2.5 billion on sugar programs to ensure the expansion of their worldwide markets.
Giovanetti asks the question most are thinking when he writes, “So what if other countries want to subsidize their sugar exports and provide U.S. consumers with cheap sugar? Shouldn’t we just let them and reap the rewards?”
His answer to this question is based upon the cause and effect of destroying the U.S. domestic sugar industry, “They do it to gain market share and to put other producers, especially U.S. producers, out of business. Once that happens, the price to U.S. consumers will be at the mercy of foreign supplies and foreign governments.”
Citing this economic reality, Giovanetti argues for “a global solution that obligates trading partners to constructive participation in free global markets – which is the goal and purpose of free trade agreements (FTAs) and of the World Trade Organization (WTO).
Representative Ted Yoho (R-FL) has proposed a solution that hits the middle ground sweet spot that Giovanetti recommends known as the Zero to Zero policy. The Yoho plan would put a pathway in place to end U.S. sugar subsidies contingent upon action by the WTO to end subsidies around the world as well. This common sense approach recognizes that simply eliminating subsidies without other major producing countries doing the same would be disastrous for domestic production and also for U.S. consumers.
As Congress continues to consider agriculture policy, they should move forward with Yoho’s zero to zero plan, putting in motion the necessary steps to eventually create a global free market for sugar producers.
Rick Manning is the vice president of public policy and communications for Americans for Limited Government.
