December 22, 2014
Forbes
By Tim Worstall
There’s rather less than nothing to this announcement that the U.S. is going to stop imposing a tariff upon imports of Mexican sugar into the U.S. For what they’re replacing the tariffs with are, at root, economically equivalent. And the end result will be that the U.S. consumer will continue to get shafted, as has been true for many decades now, in favour of the small but politically very powerful U.S. sugar producing industry. The end result is that each and every American gets shaken down for around $5 a year to benefit 4,500 farms across the country. It’s not just that this isn’t good public policy it just ain’t right either.
Here’s the actual news of the change:
"The U.S. and Mexico have struck a deal to scrap tariffs on imports of Mexican sugar, ending a trade dispute that rattled candy-makers over higher costs for their key ingredient.
The U.S. will suspend duties on Mexican sugar that were implemented earlier this year, and establish minimum prices “to guard against undercutting or suppression of U.S. prices,” the U.S. Commerce Department said in a statement late Friday.
The deal could help narrow the gap between sugar in the U.S. and the global market, where the sweetener is cheaper.
But the agreement also includes measures to limit the amount of sugar Mexico can send to the U.S., through export limits, drawing criticism from one food-industry group."
The three things, import tariffs, minimum prices and quotas are distinguishable in minor economic details. But they all have exactly the same effect. They make the price of sugar higher in the U.S. than it would be without any of the three of them. Moving from one to the other does mean that people can say they’ve done something. But they’ve not changed that underlying situation where everyone has to pay $5 a year more to benefit the politically privileged few.
As to why this happens, let Heritage tell us all:
"Sugar beet and sugarcane farms account for about one-fifth of 1 percent of U.S. farms, and sugar producers account for 1.3 percent of the value of total farm and livestock production. There are 2.2 million farms in the United States. Of that total, there are just 3,913 sugar beet farms and 666 sugarcane farms. This relatively small sector of the economy is very politically engaged, accounting for 33 percent of crop industries’ total campaign donations, and 40 percent of crop industries’ total lobbying expenditures. The special treatment that this relatively small interest group receives from the government drives up the price of sugar, jeopardizes export growth, and weakens the U.S. economy.
In fiscal year (FY) 2013, Americans consumed 12 million tons of refined sugar, with the average price for raw sugar 6 cents per pound higher than the average world price. That means, based on 24 billion pounds of refined sugar use at a 6-cents-per-pound U.S. premium, Americans paid an unnecessary $1.4 billion extra for sugar. That is equivalent to more than $310,000 per sugar farm in the United States."
As to how it happens: that 33% and 40% of total crop industry campaign and lobbying expenditures is how. Allied with the point that Mancur Olson made. None of us really notice all that much that we’re paying that extra $5 each a year. But each and every sugar farm will notice not getting that $310,000 a year in support.
Sadly, as Olson went on to say, that’s just what representative democracy ends up as. The special interest groups buy favours through the system at the expense of the general population. We get plucked for their benefit you might say. And there’s really only one solution to it. Which is to move to a minimalist, even minarchist, style of government. If we have a system that doesn’t impose duties, or tariffs, or quotas, then when those are imposed for one or other special interest group then they’ll stand out like a sore thumb. When every single product comes under some regime or another of one or more of the three then those favours will be hidden in the thickets.
The effect of this particular sugar regime is so large that Lifesavers, a quintessentially American candy, are now made in Canada. Because there’s no import duty, minimum price or quota on sugar imported already inside candy, only on sugar itself. So in Canada they can buy their sugar at the lower world price.
It’s not just that this is bad economics and bad public policy, it just isn’t right that the American population is shaken down through the political system in this manner to benefit a special interest group. And that’s without even getting into the fact that High Fructose Corn Syrup (HFCS) would be pretty much non-existent if U.S. sugar were the world price. After all, Mexican Coke tastes different because it’s made with sugar, not HFCS.