The United States’s domestic price for sugar towers over the prices that prevail on the global market. According to Bloomberg, U.S. sugar prices stand at “almost twice the global benchmark price.” What prompted this discrepancy? The U.S. Department of Agriculture (USDA) lists several protectionist measures, such as domestic marketing allotments, tariff-rate quotas, and high out-of-quota tariffs, which have served to restrict the amount of sugar available in domestic markets. This restriction in the available quantity of sugar results in higher domestic prices.
Exacerbating the problem is the fact that most American sugar consumption is not in the form of raw sugar, but in the food products that contain it . Protectionist measures have made it increasingly difficult for candy and chocolate manufacturers – manufacturers that rely heavily on sugar as an input – to operate in the United States, and have prompted many of them to relocate their business to Canada. That, in turn, makes food products that contain sugar (needless to say, a long list in America) more expensive for consumers.
The Bloomberg article notes the trend: Hershey Co. repurchased a former factory of theirs outside Ottawa; Blommer Chocolate Co. has shut down its 85-year-old Chicago plant and opened a new factory in Ontario; and Oreo-maker Mondelez International Inc. has invested $250 million in Ontario manufacturing. Despite the fact that Canada’s climate is less suitable for the cultivation of sugar than Gulf states like Florida, Louisiana, and Texas, the cost of the U.S.’s protectionist measures have encouraged hundreds of millions of dollars worth of investments in the sugar industry to be redirected north.
While some domestic sugar producers profit from these artificial supply constraints, that concentrated benefit comes at the cost of American consumers writ large. Research conducted by the Government Accountability Office (GAO) found costs to U.S. consumers of $2.5 billion to $3.5 billion per year – exceeding the benefits to domestic growers by $1 billion– while simultaneously reducing U.S. employment in industries that rely heavily on sugar as an input.
The imposition of protectionist policies on the sugar industry is yet another example of the manner in which protectionism harms American consumers. While the sugar industry might see protectionism as a sweet deal, it’s not what’s needed for a healthy economy.