As Goes Tanzania, So Goes U.S. Sugar Industry?

(Chuck Muth) – Critics of the U.S. sugar program of limited tariffs and import quotas can get a look at the future if their objective of universal elimination of the program is realized by taking a look at Tanzania, which privatized it sugar industry 20 years ago and imposes no tariffs or quotas on sugar importation.

According to a June 2 article by Masembwe Tambwe in the Tanzania Daily News, Tanzania’s duty-free importation of sugar “has crippled local sugar industries to the point where if no immediate action is taken by the government, they might be headed for closure.”

The problem, explains Kilombero Sugar Company Limited spokesman Mark Bainbridge, is that “no sugar producer anywhere in the whole of East Africa can compete with world market sugar imports at (the current) price level,” which is artificially low “because the largest sugar producing countries are heavily subsidizing sugar exports.”

Indeed, as Tom Giovanetti of the Institute for Policy Innovation outlined in a May 28 report, “Four countries control 40 of the 58 million tons of sugar exports globally” and “each of these four countries heavily subsidizes sugar production and export.”

For example, Brazil “spends at least $2.5 billion on sugar programs,” Thailand “provides direct subsidies to farmers,” India provides “interest free loans to sugar mills” and “subsidies to promote sugar exports,” while Mexico “directly owns and operates about 20 percent of its sugar industry.”

With such a high level of market-distorting subsidization from the Big Four, Giovanetti warns that “without support, the U.S. sugar industry would quickly be washed away by a tsunami of dumping and other forms of nationalistic sugar trade policies at the hands of international competitors.”

Such a threat is staring Tanzanian sugar farmers in the face this very day.

“If the country does not take deliberate measures to control sugar imports and protect the local industry,” Tambwe reports, “at stake are 75,000 jobs.”  Which would be considerably more here in the U.S. if unfettered sugar dumping was allowed.

“So what if other countries want to subsidize their sugar exports and provide U.S. consumers with cheap sugar?” Giovanetti asks rhetorically.  “Shouldn’t we just let them, and reap the rewards.”

Not if the purpose is solely “to gain market share and put other producers, especially U.S. producers, out of business,” Giovanetti responds to his own question.  Because then “the price to U.S. consumers will be at the mercy of foreign supplies and foreign governments.”

Which moves the discussion from theoretical free-market utopianism to national security.  Tanzanians are waking up to this cold reality.  Let’s hope critics of the current U.S. sugar policy do so, as well.