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The prospect of a bold new farm bill this year has Congress in a lurch, with endless debates over which amendments to include and discard. As lawmakers embrace sensible reforms such as work requirements for the Supplemental Nutritional Assistance Program, leading policymakers have expressed reluctance to include an amendment to modernize the 80 year-old US Sugar Program. Not including the modernization of the outdated program would keep high costs in place for consumers and taxpayers, ensuring backlash from voters wanting to “drain the swamp.”
Many food tariffs and regulations have gone by the wayside in recent years, leading to expanding supply and lower prices. While this trend has certainly been encouraging, there remains one troubling area of exception: sugar. American sugar prices remain well-above international averages, causing hundreds of millions of American customers to pay more for essentials at the supermarket. But why do sugar prices refuse to budge at a time when food prices remain near historic lows?
Through a system of onerous tariffs and quotas, the US keeps inexpensive foreign sugar imports out of the country. Meanwhile, price targets continue to ensure that sugar producers will be bailed out by US taxpayers if prices fall below the “right” level deemed acceptable by the United States Department of Agriculture (USDA). As a result, higher prices for millions of Americans translate into gains for a handful of large, wealthy and politically connected sugar providers.
How can such a misguided series of policies possibly be justified? Advocates of the failed status quo point to the number of “jobs saved” as the result of the tariffs and subsidies in place since the Roosevelt Administration. Even a modest effort to open up sugar markets to foreign competition will mean that American processors will lose precious ground to competitors in exporting giants such as Thailand, India, and Brazil. This doomsday scenario, however, simply does not jive with the evidence.
In 2006, the European Union (EU) implemented a wide-ranging quota relaxation and target price reduction scheme. Foreign sellers were finally let in, and prices were allowed to reflect global marketplace conditions. Despite grumblings and cautionary tales about job losses, the sky didn’t fall. The job attrition rate stayed the same in the immediate aftermath of reforms, and actually slowed down since the start of the last decade. One metric that saw considerable movement was sugar prices, which are around 20 percent lower than it was prior to reforms.
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