IPI Study: Foreign Sugar Policies Causing Global Market Distortions, Threatening U.S. Producers, Taxpayers

(By Erin Humiston, Institute for Policy Innovation) – While there are calls for the U.S. to drop its support programs for sugar producers, it’s the policies of countries like Mexico, Brazil, India and Thailand that are distorting the global sugar market and costing U.S. taxpayers.

If these market-distorting actions are allowed to continue, the otherwise competitive U.S. sugar industry is at risk of being obliterated and the prices to U.S. consumers will be at the mercy of foreign governments and supplies.

According to a new Institute for Policy Innovation (IPI) publication, “Seeking a Global Solution in Sugar Trade Policy,” sugar is one of the most politically charged raw materials in the global economy, and an arms race of state subsidies for sugar, especially in four key nations, has caused extreme market volatility.

To keep its viable and competitive domestic industries like sugar from being picked off one-by-one by nationalistic trade policy, the U.S. should pursue a globally liberalized trade regime through the World Trade Organization (WTO) and through free trade agreements (FTAs), writes IPI president Tom Giovanetti.

Otherwise?

“Countries dump subsidized sugar into the lucrative U.S. consumer market to gain market share and to put U.S. producers out of business,” writes Giovanetti.

Four key countries with aggressive sugar policies control more than two-thirds of all the sugar exported globally—Brazil, Thailand, India and Mexico. Of those countries, the dumping practices of Mexico are perhaps the most immediately harmful to the U.S., costing taxpayers in 2013 a stunning $278 million, and according to CBO projections may cost $624 million over the next decade.

That’s why the U.S. Government has begun an investigation into whether Mexico’s sugar subsidies constitute a violation of U.S. trade law.

“In a reasonably free global market, the United States can compete in sugar,” writes Giovanetti. “Achieving such a market should be the goal of U.S. policy, rather than simply allowing otherwise viable domestic U.S. sugar producers to be driven out of business by practices that are not in the best interests of either U.S. producers or consumers.”