Posted on 12/30/2021 5:43:39 AM PST by Kaslin
During the holiday season candy canes are once again omnipresent with all the joy they represent to go with their yummy goodness.
But the business behind the production of that candy cane is fraught with trade battles pitting nations against one another as quotas and subsidization distort any sense of an honest pricing model.
That is why it is good news that earlier this year, Representatives Kat Cammack (R-FL) and Dale Kildee (D-MI) introduced a new resolution to zero out the foreign subsidies that make sugar the world’s most distorted commodity market.
“Time and again, the survival of American sugar producers is threatened by the unfair practices and dumping of cheap sugar subsidized by foreign countries,” said Cammack.
Kildee added, “American sugar farmers are the best in the world, and they want to be able to compete fairly to sell their products. Unfortunately, other countries like Brazil, Thailand and India have unfair sugar subsidies and regularly dump their surplus sugar on the world market, posing a constant threat to American family farms.”
In one example, India was just found guilty by the World Trade Organization of engaging in a seven-year worldwide sugar dumping program designed to lower the price of Indian sugar to the detriment of other producers around the world.
While this may seem like a mundane topic, the truth is that it demonstrates the challenges behind efforts to end various farm subsidies, particularly sugar. The volatility and vulnerability of sugar prices to one nation’s attempted manipulation, explains why the current U.S. sugar programs, which create price floors, are essential to prevent predatory practices designed to drive out domestic producers.
Unfortunately, it has become a mantra of candy producers that this support program should be ended in their hope to benefit from prices which are temporarily lower than what they currently pay. This short-sighted approach would create the exact situation which led to the collapse of many European sugar producers over the past 15 years. This collapse destroyed much of the European Union’s (EU) domestic sugar production as manipulated lower international prices led to Europeans paying even more for sugar in just a few years as their sugar production was decimated. The end result was a decision by the EU to increase their subsidization of sugar above previous levels.
A series of studies by Patrick Chatenay, the President of ProSunergy (UK) Ltd, conducted in 2019 have shown that while initially prices did go down as foreign subsidized sugar flooded the market, as the European sugar producers were wiped out, prices climbed by 2012 to, “10% above what they were before the reform. As any business manager will tell you, additional risk entails additional costs. Since the end of 2010, the EU sugar market has been characterized by high and volatile prices, and a shortage of supplies – thus mirroring world market gyrations. The sugar users who lobbied hard for the reform – companies such as Nestle, Coca-Cola and Kraft – are complaining just as loudly as before.”
The job costs in the first six years of the disastrous experiment totaled 120,000, as the unilateral action caused 83 sugar mills to close across the continent.
Shockingly, or perhaps not, while the sugar producers are getting crushed in the system wrought by the initial unilateral ending of sugar subsidies, Chatenay identifies the large industrial sugar buyers as huge winners gaining $3.4 billion in lowered costs, “with no discernible advantage” to the consumer.
Pretty sweet deal for Nestle and others, but for European taxpayers and the actual people who grow and process European sugar, it has been a nightmare with the consumer seeing little to no benefit.
The European experience provides a roadmap for what not to do when it comes to sugar policy, but what can be done?
A critical concept in trade policy is reciprocity. What this means is that unilaterally ending commodity supports without accompanying agreed upon actions by other producers doesn’t work. For a trade deal to work, there has to be give and take between parties.
The recent WTO finding against India, the world’s second largest sugar producer demonstrates this exact point. This is why the Cammack/Kildee Zero for Zero resolution provides a common sense solution to the international sugar trade wars.
In simple terms, Zero for Zero urges the president to seek to end all sugar subsidies by major international producing countries and after this agreement has been certified by the White House for a proposal to be sent to Congress to end U.S. subsidies.
By creating an enforceable reciprocal multi-national agreement to end subsidies, the United States would be establishing a true market based trading system for sugar that would allow domestic producers to compete on a level playing field without needing government subsidies.
Rather than sending an open-ended invitation to countries like Brazil, India, Thailand and Russia to flood U.S. markets with subsidized sugar through unilaterally ending U.S. sugar programs, the Cammack/Kildee resolution sets the framework for true free trade, and should be embraced by anyone who wants a pathway toward ending not only sugar but all agricultural product subsidies.
It is time to rethink our nation’s approach to ending agricultural subsidies, rather than fighting the same old battles that have been tried and have failed for more than 70 years. It is time to pass the Zero for Zero resolution and get the ball rolling toward establishing a true free market so that free trade can meet its promise and allow American farmers to compete on a level playing field. When that occurs, they will flourish through the real competition that Zero for Zero creates, because America’s farmers are the most efficient in the world.
I could understand if subsidies help family farmers to stay in business, but more and more these are just gifts to Big Ag.
Sugar dumping? Sounds like a sticky situation.
Sugar is one of the most distorted markets in the US. In spite of what this article states, the US is not competitive. Cane is a million times more efficient to grow, harvest and process as compared to beet sugar, and is actually better in food processing because it doesn’t bubble up like beet does. Other than some places in Florida, Louisiana and Hawaii we just do not have the climate to grow cane. Last time I looked there was an import tariff on imports equal to the spot world price effectively doubling the price US consumers pay vs the rest of the world. All of this to protect a handful of beet farmers and big ag processors and to provide an obscene profit margin to the few cane producers we do have. Sugar is relatively cheap, but we pay twice what we should because of shenanigans, corruption and government theft at the end of a gun.
I know of what I speak. I was involved in the world trade for quite a while dealing in thousands to millions of metric ton quantities. Physicals, not just paper.
Cheap everywhere but here and politicians blame everyone but themselves. They are mostly crooks and liars.
Big Ag has the politicians by the nads.
The USA developed a huge fructose industry for exactly this reason. Of course, there has been a push back, and Americans are now using less of it - and I believe less sugar as well. There's only so much even obese Americans can eat.
Why not simply have a simple duty of 50% on imported cane sugar, instead of the complicated quota system that exists now?
” an enforceable reciprocal multi-national agreement”
and who enforces that?
WTO? UN? . .. .
let the market speak. Competitive advantage is a real thing.
Count the real US jobs in production - price it into the deal - time frame for an end.
We don’t really need all that sugar anyway-
It kills way more people that Fentanyl, and has been for many, many years.
I know of what I speak. I was involved in the world trade for quite a while dealing in thousands to millions of metric ton quantities. Physicals, not just paper.
You just saved me a lot of typing, thanks. The biggest beneficiary of this looting of the American people is Archer Daniels Midland (ADM) because the tariffs (combined with massive big-ag subsidies for sugar) create the market for corn syrup as a substitute for sugar. This makes Americans' sweets more expensive, taste worse and they are more harmful for health than actual sugar.
The sad news is that this distortion is 100% bipartisan. Everyone in government is on the payroll of ADM and no one will speak up against it.
The even sadder news is that news sources that might be the only people speaking up against this looting of our pockets are themselves on the take, many of them.
Is Townhall on the take? Did they get paid for this advertisement? I don't know, but it is completely impossible in my opinion for someone who knows so much about international sugar policy to write a whole long article on this topic without once mentioning all the distortions in the U.S. market, unless that person is just going out of his way to be a shill for ADM and American big-ag.
And why would someone from a scrappy small conservative website decide to stand up against the American people and shill for big-ag?
I've seen other worrying content in Townhall like this before and now I'm seeing a trend.
High Fructose Corn Syrup is the killer.
I recall the ads touting C&H sugar as “pure cane sugar from Hawaii,” but no more. Sugar is no longer grown in Hawaii.
Used to be Gonads, but squeezed the ‘go’ right out of them.
HFCS is not your friend. Soon will discover that it causes Inflammatory Bowel Disease, if not a precursor to colo-rectal cancer.
Why 1 cent of duty? Unlike steel, aluminum and energy there is no national security implications to letting comparative advantage work.
I assume no one in the industry, and no relevant state or Federal politicians would ever agree to no “protection” for farmers and sugar industry whatsoever. It hasn’t happened in half a century or longer.
Only suggesting that perhaps a straight-up duty would make a lot more sense, be less corrupt and more clear for everyone involved than present quota system
To harvest sugarcane, first they burn the field
Horrible air and water pollution and the EPA looks away.
These days, family farms either "go big" or go out of business. My home parish (county) of Pointe Coupee in South Louisiana grows a LOT of sugar, and it takes big investment to do. Small farms are just not economically viable.
Well eventually we’re going to reap the whirlwind for it.
I suppose the corn lobby (producing high fructose corn sugar) would love to see the sugar industry collapse.
The corn lobby has personal interest in seeing the small US cane producers and crappy beet producers succeed. It gives them cover. HFCS is inferior in every way to cane sugar in processing. Invert corn sugars have some uses, but as a sweetener and in processing corn syrup sucks compared to either and for many uses the beet sugar is vastly inferior too.
With more than 50 million MT of production of cane sugar, Brazil leads global production. They have the climate for it. We don’t. Beets are inefficient and yield an inferior end product. HFCS is expensive to produce. Sucks in industrial food processing. Fructose has major blood sugar impacts beyond that of sucrose.
The sugar industry will not collapse. It should not be an industry in the US is all. Comparative advantage. Basic economics. If the US sugar industry collapsed, it would not have national security implications. Same for the massive HFCS plants. Same for ethanol production. All are inefficient resource allocation.
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