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Sugar Subsidies Should Go—Consumers And Candy Manufacturers Would Benefit

May 17, 2018

No farm group spends more on lobbying to keep its sweet tooth satisfied than the sugar lobby.

U.S agriculture policy, especially the farm bill fiasco that comes up for renewal every five years, is loaded with pork-barrel spending and reminds us of the old Soviet-era “five-year plan.” From billions in subsidies and insurance premium payments for multimillionaire corporate farmers to providing food stamps to the able-bodied—even when they refuse to seek employment—the farm bill is a boondoggle only special interests and the politicians who benefit from their campaign donations could love.

No farm group spends more on lobbying to keep its sweet tooth satisfied than the sugar lobby. A relatively small group of sugar cane and sugar beet farmers and processors haul in an inordinate amount of support in nearly every farm bill, which guarantees them a price floor for their product, cheap loans, and tariffs that help keep competitors out of their market.

U.S. consumers and candy makers suffer because of this largesse. Justin Sykes of Americans for Tax Reform found the average wholesale price of domestically produced sugar in the United States is more than double the average price of sugar elsewhere in the world.

According to agriculture Census data, the hundreds of millions of dollars in support reaped by the sugar lobby support only about 4,500 sugar beet or cane farm jobs, plus an additional 18,000 jobs in the sugar processing industry. By comparison, there are 600,000 jobs in the food and baking sector, which are harmed by ill-conceived federal sugar policies. It is not surprising then Sykes found the U.S. Sugar Program led to a loss in U.S. manufacturing jobs.

According to the U.S. Department of Commerce, for every sugar-growing job saved by America’s artificially high sugar prices, approximately three in the confectionery industry are lost. Analyzing U.S. Census Bureau data, Alexandra Wexler wrote in 2013 in a Wall Street Journal article that “total U.S. confectionery manufacturing employment declined by 22 percent from 1998 through 2011,” in no small part due to high sugar prices. Chocolate and candy manufacturers moved their operations to Canada, Mexico, and elsewhere overseas in pursuit of cheaper sugar—a critical, if not primary, ingredient in their products.

A coalition of environmentalists, bakers, candy and food manufacturers, and free-market research centers formed The Alliance for Fair Sugar Policy to fight for an end to Big Sugar’s stranglehold on food policy. The Heartland Institute, where I work as a research fellow, is a proud member of the Alliance.

The Alliance notes the “sugar shakedown is baked into nearly every food, snack and treat, which results in zero benefit for the American consumer. The U.S. sugar program forces manufacturers to pay twice as much for sugar as the rest of the world, putting American small businesses at a competitive disadvantage when it comes to creating jobs. According to the U.S. Census Bureau, the sugar program killed 123,000 jobs between 1997 and 2015. The American Enterprise Institute estimates that the program costs small businesses and consumers $2.4 – $4 billion a year.”

Thankfully, some legislators not beholden to sugar daddies are proposing reforms to U.S. sugar policy. For instance, Virginia Foxx (R-NC) has offered an amendment to the farm bill to eliminate the production limits keeping sugar prices higher for growers. Foxx’s amendments also would repeal a sugar-to-ethanol program under which the federal government sells surplus sugar to biofuels producers. It would also grant to the Trump administration some flexibility to lower tariffs on imported sugar. By way of compensation for the loss of their historic ill-gotten but legal gains at the public’s expense, Foxx’s amendment would exempt sugar processors from reimbursing the federal government for costs incurred under certain federal loan programs.

To be fair, protectionist policies on the U.S. sugar market is not a new phenomenon; the federal government has been imposing tariffs on sugar imports since 1789, and the modern Sugar Program has its roots in the Sugar Act of 1937, which established domestic production quotas, subsidies, tariffs, and import quotas, all of which were designed to restrict sugar supplies and increase prices. If adopted, Foxx’s amendment would represent the first substantial reform to the Sugar Program in more than 80 years. Such reform is long overdue.

The U.S. Sugar Program represents crony capitalism at its worst. The program delivers unearned billions to a well-funded, politically connected industry, in the process punishing consumers, American manufacturers, and workers by imposing higher prices on consumers, diminishing competition in in the marketplace, and closing factories in the United States. It’s time to end sweetheart deals for domestic sugar farmers and processors and foreign candy manufacturers.

Author
H. Sterling Burnett, Ph.D. is a Heartland senior fellow on environmental policy and the managing editor of Environment & Climate News.
hsburnett@heartland.org
Author
Matthew Glans joined the staff of The Heartland Institute in November 2007 as legislative specialist for insurance and finance. In 2012, Glans was named senior policy analyst.
mglans@heartland.org @HeartlandGR