Sour Trade Barriers Send Sweets Manufacturer Scurrying

Published November 2, 2015

The bakery responsible for producing Oreos for Nabisco, a subsidiary of Mondelez International, is laying off 600 workers in Illinois and spending $130 million to move production of Oreos and other products to factories in Salinas, Mexico.

U.S. government-imposed trade barriers, such as tariffs and quotas on imported sugar, artificially increase the cost of sugar used in producing sweet snacks in the United States, making it more economical to send production lines to countries with freer trade laws.

Big Sugar

Bryan Riley, a trade policy analyst with The Heritage Foundation, says sugar farmers benefitting from restricted trade hold disproportionate influence over lawmakers.

“According to Heritage Foundation research, sugar beet and sugarcane farms account for about 1.3 percent of the value of total farm and livestock production, but this relatively small sector of the economy accounts for 33 percent of crop industries’ total campaign donations, and 40 percent of crop industries’ total lobbying expenditures,” Riley said.

Riley says trade barriers benefit connected insiders at the expense of consumers.

“We should eliminate all tariffs and quotas on sugar,” Riley said. “Trade barriers protect politically powerful special interests at the expense of the rest of us.”    

Chicago Candyland

Daniel Pearson, a senior fellow for trade policy at the Cato Institute, says freer trade is a sweet deal for jobseekers and job creators alike.

“Chicago was once a major center for the manufacture of candy and other sweetened products,” Pearson said. “Although many of those jobs have gone away, enough still are left that the city and the State of Illinois would be better off if world-price sugar was freely available.”

Marginal Decisions

The cost of doing business and buying raw materials is an important factor for business owners, Pearson says.

“Press reports indicate that relocating production overseas accounted for approximately 6,400 [sugar processing industry] job losses in the five years prior to 2006,” Pearson said. “No doubt some of that production could have remained in the United States, but at operating margins so low as to be unattractive. It is at times when companies are trying to decide whether to upgrade a plant in this country that they tend to look seriously at building something new in another country.”

Gabrielle Cintorino ([email protected]) writes from Nashville, Tennessee.

Internet Info:

Hannelore Weck-Hannemann, Journal of Institutional and Theoretical Economics, “Protectionism in Direct Democracy”: