Not as Sweet as You'd Think: US Sugar Policy and the War for the Sugar Trade

By Fae MacArthur Clark

Website: http://www.bard.edu/bgia/bardpolitik
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If you're one of the 57% of Americans that drink coffee every day, chances are you've got some idea where your coffee beans are coming from. The “fair trade” movement, promoting the wares of small farmers against corporate coffee plantations, has spawned a cottage industry and inspired documentaries like the 2006 British Independent Film Award winning Black Gold. Fair trade coffee is springing up everywhere from college cafes to corporate break rooms and coffee shops across the country. But what about the origin of the 16.8g of sugar your average American puts in their 12oz cup o' Joe?

According to the USDA, that same American goes through a whopping 150-170 lbs. of sugar each year – that's roughly the equivalent of their own weight in sugar and makes the US the world's largest sugar consumer, going through 24,320,000 tons of sugar each year. And that's not just a result of a penchant for candy. Sugar can be found in 70% of packaged foods, both savory and sweet, as well as the usual culprits of baked goods, sodas, and breakfast cereals.

American agriculture ensures the nation’s sweet tooth is well supplied. In 2008, 83% of sugar consumed in the US is produced in one of America's 18 sugar producing states. Of the 17% produced abroad, Brazil, Mexico, the Dominican Republic, the Philippines and Guatamala together hold over half the trade. Mexico, however, is the only country allowed free access to the U.S. sugar market, a product of its inclusion in NAFTA, while all other countries must operate within quotas set by the United States Department of Agriculture each year. Any imports over the pre-determined quota are subject to high tariffs which render that sugar uncompetitive in the U.S. market.

While that’s great for Florida’s sugar plantations, its anything but sweet for Mary and David Graves, co-owners of the family run jam company Berkshire Berries. The Graves’ buy sugar at about twice the global average sugar price thanks to agricultural tariffs. Their berries may all come from their garden and local farms, but Mr. Graves explains that, when it comes to sugar, they just buy what's cheapest. When asked if he would consider buying fair trade or organic sugar Mr. Graves replied that “it's difficult enough running [Berkshire Berries] and the expenses just keep going up and up all the time.”

And the Graves’ are not alone. Economist Mark Groombridge, writing for the conservative CATO institute, says “the program benefits a small number of sugar producers, but virtually every governmental and nongovernmental survey concludes that the program results in a net loss of welfare for the U.S. economy, with U.S. consumers suffering the most. ” Groombridge, whose article bemoans “America's Bittersweet Sugar Policy,” cites statistics from the nonpartisan US General Accounting Office and the International Trade Commission. “U.S. sugar consumers would not be the only winners if U.S. price supports and quotas were removed. Poor nations would benefit as well. ” he argues.

The benefits, however, might not be as clear as they seem. According to the fair trade organization TransFairUSA, “the small amount of sugar that we do import is grown by impoverished sugar cane farmers in the developing world, subject to a declining world market price, environmental degradation, and hazardous working conditions.” So a new sugar policy might bring lower prices for US sugar consumers, but at what cost?

Without the quotas which ensure them a majority share in the market, U.S. sugar producers would find it much harder to compete and remain viable enterprises. U.S. sugar farmers going out of business would also leave the U.S. far more vulnerable to fluctuations in the world sugar market and could lead, in extreme cases, to sugar rationing like that seen during World War II.

Agricultural tariffs turn out to be something of an exception to the rules of free trade. Attempts to erect protective tariffs on behalf of U.S. industries of far greater strategic importance, most notably the steel industry, provoke international outcries and legal action. In the case of steel, attempts by President George W. Bush to impose heavy tariffs on steel imports in 2002 led to a counter-tariffs by the European Union and lawsuits in the WTO, forcing him to lift the restrictions a year later. The WTO ultimately ruled the tariffs were contrary to international agreements.

As one of the world's foremost proponents of free trade, the US takes such accusations seriously. Yet because other developed economies erect even higher barriers on their agricultural products, protectionism in the farming sector is widely tolerated. The Japanese, for instance, protect their rice farmers and fishing industry. The European Union’s “Common Agricultural Policy” distorts trade incentives even more radically.

Still, not everyone likes the status quo. The US faces sharp criticism for its sugar policy, particularly from Brazil, the world's largest sugar producer.

“The United States’ reluctance to improve market access for sugar importers undermines its position in trade negotiations” reads a paper entitled “Is the US Sugar Problem Solvable?” by the Competitive Enterprise Institute, public interest group dedicated to free enterprise and limited government

Sugar producing countries may not yet have the clout globally to muster the same sort of opposition as steel producing countries did in 2002, but sugar protectionism does undermine the ability of the U.S. to push these and other developing countries towards freer trade.

Furthermore, sugar protectionism also has significant affects upon entirely non food related markets. As Gregory Mankiw, former chairman of the President's Council of Economic Advisors and professor of economics at Harvard, points out, sugar is also used in the production of ethanol.

Niall Ferguson, a history professor at Harvard and author of The Ascent of Money, asked in an article for the LA Times entitled “Put Some Sugar in Your Tank”, “what's preventing the Northern Hemisphere from following Brazil's lead [in ethanol powered cars]?” His response? “The answer is not so much Big Oil -- though U.S. oil companies have fought tooth and nail against the introduction of ethanol, even as a fuel additive -- as Small Agriculture.” Ferguson blames high tariffs on ethanol, derived from cane sugar, from Brazil.

So maybe that sugar in your coffee is bittersweet, but it doesn't have to be. With a 2005 survey published in Ecological Economics finding 85% of US consumers willing to pay a premium for fair trade coffee, buyers might also consider making the extra investment for fair trade sugar. That said, whatever the label, the sugar trade can be neither fair nor free if US policy continues as it has since the first sugar act of 1934.