You - yes, you, the one reading this - are paying people you don't even know, for nothing. Lots of them, in fact. Today, however, I'm going to focus on a particularly (to me) egregious group - the American sugar lobby. Note that a big chunk of them are corn farmers.
The United States has long regulated the sugar trade. In the nineteenth century, this was done by tariff. In 1934, it was switched over to a quota, with the Jones-Costigan Act. (No, no quiz later - you can safely forget the name.) This made the Department of Agriculture responsible for calculating domestic sugar needs, and then allocating that amount of production between U.S. beet sugar, cane sugar, sugar from U.S. dependancies, and Cuba. Less than 1% was allocated to all other suppliers. (Sounds a lot like communism, doesn't it?)
Stuff happened (Hawaiian statehood, Cuban revolution), but this stayed the same until 1974, when the whole quota mechanism was scrapped and a fairly small tariff put in instead. This proved unable to regulate imports as well as (certain) people wanted, so in May 1982 a quota was re-instated. In 1989, in response to a complaint by Australia, a panel of the General Agreement on Tariffs and Trade (GATT) found the quota to be in violation of the GATT rules, so in 1990 the U.S. changed the quota to a "tariff-rate quota", in keeping with GATT.
The effect has been the same as before. A quota makes imports over a certain amount illegal. A Tariff-Rate Quota, however, merely changes the tariff after a certain quota has been reached. For instance, the tariff on the first 24,325 tons of sugar from Taiwan to the United States is 0.625 cents per pound. For all the sugar past that, the tariff is 16.72 cents per pound. (On a product that cost 6 cents a pound in 2000). Note a difference? Yeah. It's technically possible to import as much as you like, but in point of fact it's as good as a quota.
Okay, let's get even more specific. In the case of sugar, the TRQ is on a country by country basis, but overall it allowed for total imports of raw cane sugar of 1,117,195 metric tons for the 2000/2001 period. (Plus another 22,000 metric tons of molasses and other sugars.) (1) In short tons (2,000 pounds each), that's 1,231,497 tons of imported sugar (plus 24,251 tons of other sugary stuff). (2)
"That's great," you say, "but what does it mean?" Well, the U.S. used close to 22 million tons of sugar and sweeteners in 1999. We only imported 1.2 million tons of sugar. Some of that 22 million is honey, maple syrup, and other stuff, but that amount is trivial. Almost all of the rest is divided about equally between U.S. produced sugar, and U.S. produced corn syrup.
"Well, that's okay, right?" Let me quote from the USDA. "From 1985 to 1999, the annual U.S. raw sugar price averaged 21.91 cents per pound, ranging from 20.89 cents in 1985 to a high of 23.29 cents in 1990. However, burgeoning sugar supplies caused the monthly average raw sugar price to fall below 18 cents per pound from November 1999 through February 2000 and again in July 2000."
Meanwhile, for the rest of the world, "The raw cane sugar price averaged 10.68 cents per pound from 1990 through 1999. The monthly raw sugar price set new lows in 1999 and 2000 when it fell below 6 cents per pound for two months in 1999 and 2 months in 2000."
Take a look at those numbers again. The U.S. consumer, through the 1990s, paid twice as much for sugar as the rest of the world. And in 2000, we were paying up to three times as much as the rest of the world.
And this isn't just the bag of sugar you buy to make lemonade and chocolate chip cookies. This is everything you eat that has been sweetened. Soda pop. Candy. Breakfast cereal. Barbeque sauce, catsup, cookies, shortbread, teriyaki sauce, cakes, ice cream, Kool-aid, chocolate milk... everything. How much sweet food and sweet drinks do you think you consume in a year? (On average, Americans consume 158 pounds.) Well, you are paying as much as 200% of the price of that sweetener to big agribusiness, and getting nothing in return.
Okay, that's not precisely true. You are getting high-fructose corn syrup in return, half of the time. If it's real sugar you are buying, then you are paying 200% extra for it and getting zilch. But in most sweetened foods, at least of the industrial sort, in America these days, we use good old - er, good new - HFCS. Because it's cheaper than artificially high-priced sugar. "In 1994, the HFCS-42 price averaged close to 19 cents per pound, but has averaged slightly more than 11 cents per pound for most of 2000."
Oh, well then. So, although for all the real sugar you bought in 2000, you paid an extra 200% over world prices, for your sweetened foods that used HFCS, you paid just under twice as much for your sweetener as you would have for sugar. That's nice. The muggers are only taking the cash, instead of the whole wallet.
So, what is this buying us, anyways? The original purpose of the quota was to protect our sugar growers, or at least our soon-to-be sugar growers, from evil Latin American competition. And we do produce sugar - 9 million short tons in 2000. Sugar beets are a little over half of that, and cane sugar is the rest. That's on a total of 8,075 farms (in 1997), and that number is slowly decreasing, even as yield is slowly increasing. If all that sold at the (historically low) price of 18 cents per pound, that sugar cost $3.24 billion in 2000. (3)
That means, just for actual sugar, the American consumers are paying 8,075 people (okay - corporations, it's more people than that) $2 billion dollars per year to grow sugar needlessly. We could get the same exact amount of sugar for $1 billion, at world prices. Sure, 8,075 farmers would have to switch to pineapples or oranges, but what would America do with $2 billion more to spend each year?
And that's just actual sugar. HFCS production in 1999 was 9.4 million tons. (That takes a fairly large amount of corn, by the way. About 540 million bushels, which represents 5.3% of the total US corn crop.) That's $2 billion. So if we were using sugar instead of corn syrup, we the American consumers would save another $1 billion. That's $3 billion a year the sugar quota costs American consumers.
To take it home to you, let's say you are that average American who consumes 158 pounds of sweetener per year. Half in sugar, which is 200% overpriced, and half in HFCS, which is only 100% overpriced. That means that you pay $14.22 for sugar and $8.69 for HFCS. At world prices, you'd pay $9.48 for all of it, in sugar. You're giving away $13.43 a year. Sucker.
Not panicking? Sneering at $13.43? Well, buddy, that's why the quota is still there. Boy Howdy, how I wish I could fleece every one of America's 300 million consumers for $1, not to mention $13.43. But that's how it's done. Steal a little from everyone, and you'll get away with it for years.
"But wait," you say, "there is at least some ironic justice in the fact that, by artificially inflating our sugar prices, we cannot produce sugar-containing products at competitive prices on the world market." How idealistic (aka foolish) you still are! The U.S. also has a "Sugar-Containing Products Re-Export Program", which, and I quote yet again from the USDA, "is designed to put U.S. manufacturers of sugar-containing products on a level playing field in the world market. U.S. participants in the Sugar-Containing Products Re-Export Program may buy world priced sugar from any of the refiner participants or their agents for use in products that will be exported onto the world market."
That's right! If you are shipping the sugar here, but not selling the sugary product here, you can buy sugar at the world price! Only U.S. consumers have to pay! Ha ha!
As an end note, it won't surprise you to learn that there is an organization devoted to eliminating this incredible market distortion. I don't know anything about them, but feel free to check them out at www.sugar-reform.org. It looks like they last updated their site in 1997. They do have some interesting data, particularly for other countries. I'd wish them luck, but until that $13.43 per year really starts gnawing at people, I don't see things changing from within. Only the rest of the world's continued annoyance at us has any real likelihood of changing things.
Oh, my numbers? They are all from the USDA, except the 2000/2001 TRQ number which is from the Office of the US Trade Representative.
- Sun Ra
1) However, in case you were worried, "U.S. Note 5 also authorizes the establishment of higher TRQ amounts whenever the Secretary of Agriculture 'believes that domestic supplies of sugars may be inadequate to meet domestic demand at reasonable prices.'" Phew!
2) The conversion: 1 metric ton is equal to 1.10231125 short tons
3) In point of fact, it doesn't all sell at that price. From the USDA data, cash receipts for cane sugar and beet sugar in 2000 were a little over $1 billion apeice. Where that extra $1 billion (from the $3.2) is shaved off, I must confess don't know. It could be the "cash receipts" part, since futures contracts on sugar cost less because they reduce the farmer's risk.
Columns by Sun Ra