Sometimes government policy have very unexpected effects on the economy and the choices that business make. These unexpected effects often cost the economy billions and harm consumers and workers. Sugar protection in the United States is an example of this and has harmed the economy of Illinois. If you are old enough you might remember a time when the sweetener of choice for most products was sugar. As most people are aware many, if not most products, are now sweetened with high fructose corn syrup. Why the change from sugar to high fructose corn syrup? Did consumers decide they like the taste of high fructose corn syrup better? Is high fructose corn syrup a better sweetener or more efficient to use? The answer has little to do with changes in the market and everything to do with bad government policy.
The United States has produced sugar for most of its history and produces a lot of sugar. The US produces more sugar than most of the other nations in the world. So one would think that sugar should be relatively cheap in the United States, but it is not. As it turns out the climate in the United States is not really suited to growing sugar efficiently. For this reason it cost significantly more to produce sugar in the United States than in many other nations. If the market was left to function normally, companies would buy sugar from the cheaper provider, mainly overseas producers, and sugar prices in the United States would be similar to world sugar prices. Instead of letting the market function the way it should, sugar producers in the United States have used government clout to protect them at the expense of the general public. Sugar producer have use political clout to receive price supports, subsidies, quotas ( limits on sugar imports), tariffs (taxes on sugar imports) and host of other benefits from the government. As result of these government interventions sugar cost twice as much in the United States and as it does worldwide. So it is no surprise that companies would choose to use high fructose corn syrup, which has a price that is similar to the world price of sugar, in the place of sugar.
This is bad for a number of reasons; leaving aside claims that high fructose corn syrup has a worse effect on people’s health than sugar. It limits consumer choice, since sugar is artificially high it means that few companies will use it a sweetener since it will raise the cost of their product. This gives consumers who wish to purchase goods sweetened with sugar fewer choice than they would in a normal market. It also creates a cost to everyone in society. Taxpayers end up paying out over 100 million dollars a year to help support sugar growers in the United States. The artificial high prices for sugar created by trade restrictions cost consumer around 2 billion dollars a year. It harms American businesses that face higher cost than their competitors globally if they wish to use sugar in their products. This has cost Illinois thousands of jobs, as companies like Fannie Mae closed their factory and Brach moved its production facility to Mexico to be able to take advantage of lower global sugar prices. Other companies have made the decision to move to Canada for similar reasons.
It is well past time to end the protection of sugar produces in the United States. Doing so will lower prices, increase competition, increase consumer choice, create jobs, revitalize industries and save the public billions each year
Comments