Apr 30 2013
This episode of my favorite podcast, Planet Money provides a great overview of the effects of the US government’s long-time protectiono f the sugar industry on various stakeholders.
When teaching the effects of protectionism, I urge students to evaluate its effects on both consumers and producers. Often, however, students generalize this analysis, and make broad statements like “consumer will pay higher prices for the good”, without clarifying who, exactly, the consumers of the protected good are. In the case of agricultural commodities, the “consumer” is typically not a private individual who buys the product at a store, rather, it’s the producers of process foods that use the commodities as inputs into their products which then are sold to consumers.
This is all to say that there is more than just a loss of “consumer surplus” in the market for a protected agricultural commodity. Rather, the effects can be far more serious, as the producers of hte consumer goods that use the commodity as an input may be forced to shut down their domestic production and move overseas. This is the story told in the podcast, as the maker of the candy dum dums has moved its plants to Mexico to take advantage not of lower wages or less regulation, rather the cheaper sugar that can be acquired there.
Listen to the podcast, and respond to the discussion questions that follow:
- What method does the US government use to protect domestic sugar producers?
- What are the main economic arguments for continued protection of the US sugar industry?
- What are the main arguments for the removal of protection of US sugar producers?
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