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Sugar Wars Advance on Valentine's Day

There's little love between the confectionary and sugar industries. (AP Photo/Carolyn Kaster)  

photo of Niraj Chokshi
February 14, 2013

Before you bite into that next Valentine’s Day morsel, you may want to contemplate the complex sugar subsidies behind it — and their far-reaching impact on the U.S. economy.

A bipartisan group of lawmakers introduced a bill Thursday that would unwind price supports for domestic sugar producers. Authors of the bill argue that they are unnecessary, unfair and boost sugar prices at the expense of consumers and jobs. But sugar producers say those same subsidies keep prices in check and the industry competitive. It’s an almost perennial battle that can affect jobs and trade, depending on whom you ask.

"No program should be immune to updates or improvements, not while we’re losing valuable manufacturing jobs all over the country," Sen. Jeanne Shaheen, D-N.H., said in a statement on Thursday after unveiling the bill at a press conference. She was joined by Sens. Mark Kirk, R-Ill., and Pat Toomey, R-Pa., as well as Reps. Joe Pitts, R-Pa., Earl Blumenauer, D-Ore., and Danny Davis, D-Ill. The bill is the Shaheen-Kirk Sugar Reform Act.


Opponents of the subsidies — candymakers, free-trade advocates, large business groups and others — argue that sugar price supports have cost roughly $14 billion over the last four years and 112,000 jobs between 1997 and 2009. Preferential treatment can also complicate free-trade agreements with other nations, they say. But fans of the program — the sugar industry and others — contend that importance of the subsidies is misunderstood.

The job-loss estimate is based on a 2006 Commerce Department report, which found that every sugar industry job saved by the price supports is equivalent to three jobs lost in the sugar-related food industry. But the American Sugar Alliance, an industry lobbying group, contends that the report was flawed: it underestimated sugar-industry jobs and overestimated those in related industries, University of Maryland professor Alexander Triantis wrote for the ASA.

And while the Commerce Department report cited a 2004 International Trade Commission finding that ending the sugar program would boost the economy to the tune of $1 billion, that estimate has fallen dramatically. In a 2011 update, the ITC puts the benefit closer to $49 million thanks to a smaller gap between U.S. and world sugar prices. But opponents of the sugar program point to yet another official study for support. In 2000, the nonpartisan Government Accountability Office found that sugar price supports cost the American economy $700 million in 1996 and $900 million in 1998.

Additionally, the subsidies can hinder trade negotiations, opponents of the program say. The U.S. insistence that sugar be exempted from a free-trade agreement with Australia paved the way for South Korea to make a similar demand of the U.S. with regard to rice, they argue.

“This stuff grows and escalates. If you let one do it, then the list is going to get very long because everybody wants protection,” said Bill Reinsch, president of the National Foreign Trade Council, which promotes free trade.

The prospects of the new effort aren't certain. A similar measure to end the sugar subsidies came within four votes of passing the Senate last summer, which offers some hope for that chamber, Reinsch said.

"I would be moderately optimistic about the Senate," he said. "I think the House is still going to be a heavy lift."

Source: World Bank data

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