Oct 19 2007
“The sugar producers say whatever its costs, the new farm bill is needed to save their industry.”
We’ve all heard the news about this amazing new fuel that just might save the world from the perils of global warming… ethanol, food fuel, alternative energy, replacement for oil, the panacea to all of America’s energy, climate, and geo-political woes! Corn farmers in America’s grain belt have benefited hugely of late due to large subsidies bundled with America’s latest farm bill.
The new version of this bill, being debated in Congress now, contains a proposal to prop up the country’s 12,000 sugar farmers by promising to buy any surplus sugar resulting from cheap sugar imports from Mexico (themselves the result of market liberalizations accompanying the North Atlantic Free Trade Agreement) at a profitable price. The sugar lobby insists that sugar should play a larger part in the production of ethanol, currently which is made mostly from corn.
To effect that policy, the government would buy excess sugar and sell it at a loss to ethanol producers. They ferment corn starch to ethanol, but adding a little sugar can speed the reaction…
Mr. Keenum suggested that the Agriculture Department would end up buying sugar for 22 cents a pound and selling it to ethanol producers for 4 to 7 cents a pound. â€œYou can easily do the math and look at the loss potential,â€ he said.
What’s the problem with this picture? Well, clearly America’s 12,000 sugar farmers are benefiting, because they have a guaranteed market for their product, even in the face of much cheaper sugar coming from Mexico (which clearly has a comparative advantage in sugar). But what are the costs? Taxpayers, of course, will foot the government’s bill as it buys up all of the excess sugar, and taxpayers will take the loss when that sugar is sold to ethanol producers at a fraction of the price.
So what’s got the sugar farmers all in a tizzy anyhow? The problem is FREE TRADE!
At issue is a provision of the North American Free Trade Agreement, the big trade pact meant to create a common market among Mexico, Canada and the United States. Though NAFTA was adopted in 1993, some of its more controversial provisions are only now taking effect.
One of them will soon open the United States to unlimited sugar imports from Mexico â€” the biggest crack in years in the wall of price supports and protectionism the government, at the behest of the sugar industry, has erected against foreign competition. That system includes quotas to limit domestic production and tariffs to limit imports, resulting in a market price for sugar in the United States that is typically twice the world market price.
Here’s the problem with the sugar farmer’s proposal: NAFTA and the removal of tariffs and quotas it mandates are meant to help Americans, Mexicans and Canadians alike as government intervention is reduced and their respective economies shift towards a combination of goods and services in which each nation has a comparative advantage. Through trade, all three countries will eventually enjoy a higher standard of living, with access to more products and better prices than they ever would have without trade!
So the benefits of lower prices and increased output in both Mexico and the US that should result from free trade are being resisted by an extremely small group of farmers in two states in one of the countries. Gains to hundreds of millions of American consumers and tens of thousands of Mexican farmers (not to mention the countless American industries that export products to Mexico and thus benefit from freer trade and higher incomes there) are threatened. And, for what? Read this:
Across a big swath of the state, the sweet smell of molasses wafts on the breeze in autumn, social life revolves around sugar fairs and festivals, and old sugar kettles decorate flower gardens. Whitewashed mansions, stately but not always well maintained, are shaded by live oaks draped with moss.
People fear the loss of a way of life with the onslaught of Mexican sugar. Louisianaâ€™s farmers and mill workers say sugar is in their blood…
How quaint… Millions upon millions of consumers, producers, and farmers, rich and poor, in American and abroad, are to pay higher prices and put $660 million of their tax dollars towards subsidizing the aristocratic, high-browed lifestyle of an inefficient industry that by most counts should have died out decades ago if it weren’t for government protection.
In the meantime, sugar farmers will keep praying… and donating money to those who have the ability to make their fantasy live on…
Sugar producers donated $2.7 million in campaign contributions to House and Senate incumbents in 2006, more than any other group of food growers, according to the Center for Responsive Politics, a Washington group…
The sugar producers say whatever its costs, the new farm bill is needed to save their industry.
â€œWe donâ€™t like the government spending money, but if they are going to give away our market to foreign imports then we have to look for alternatives,â€ said Mr. Simon of the American Sugar Cane League.
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