Support Grows for Sugar Policy Reform

Published December 3, 2017

A bill in the U.S. House of Representatives to reform federal sugar price supports is gaining support.

On November 7, 2017, U.S. Rep. Virginia Foxx (R-VA) introduced H.R. 4265, the Sugar Policy Modernization Act. The bill would remove government-mandated price floors, ceilings on domestic farmers’ production, and caps on the amount of sugar food manufacturers are allowed to be purchase and import from foreign farmers.

On November 30, U.S. Rep. Ted Budd (R-NC) became the bill’s 48th cosponsor.

Sugary Interventionism

Colin Grabow, a policy analyst at the Cato Institute’s Herbert A. Stiefel Center for Trade Policy Studies, says there are several ways the U.S. government artificially increases sugar prices.

“In a nutshell, the federal sugar program uses four key tools to set a price floor for sugar, ensuring a degree of predictability and a minimum income for sugar processors and growers,” Grabow said. “These tools are price support loans, marketing allotments, a feedstock flexibility program, and tariff rate quotas on imports of sugar.”

The federal government’s sugar policies make things sour for consumers, Grabow says.

“Quite simply, customers are forced to pay more for sugar and products containing sugar than what they otherwise would, with U.S. sugar prices significantly higher than those outside the country,” Grabow said.

Treating Consumers Right

Grabow says the proposed reforms are a sweet treat for consumers.

“Among its provisions, the bill introduces some flexibility into the tariff rate quota program, abolishes the feedstock flexibility program, and claims to scrap the marketing allotments,” Grabow said. “All of this should allow for expanded market forces, resulting in increased sugar supplies and reduced sugar prices, although I am unsure as to the extent of both.

“The result would be lower prices for consumers and a more uncertain impact for farmers,” Grabow said.

‘Insulting to Farmers’

Daren Bakst, a research fellow in agricultural policy at The Heritage Foundation, says U.S. sugar farmers don’t need government subsidies.

“The general concept that farmers need these subsidies to manage the risks is insulting to farmers,” Bakst said. “Farmers don’t need subsidies to succeed.”

Helping a Few, Hurting Many

American sugar farmers have been getting a sweet subsidy while everybody else gets the bill, Bakst says.

“The program comes at the expense of consumers, the confectioners, and anyone who uses sugar in their products,” Bakst said. “For every sugar-growing job you save, you lose three jobs in the confectionary industry. In other words, you are helping a very small, narrow interest at the expense of others.”

Sugar subsidies’ worst effects are felt by low-income people, Bakst says

“It is a hidden tax on a consumer,” Bakst said. “It’s regressive in nature, and it hurts the poor the most. When you artificially drive up food prices, you are going to have a disproportionate impact on lower-income households.”

Sweet Free-Market Reforms

The bill would help remove government bureaucrats from the business of growing and making food, Bakst says.

“This legislation gets rid of market allotments, which effectively limit how much sugar can be sold,” Bakst said. “You’d be getting rid of a major distortion in the market. As a result, the market will ultimately decide the amount of sugar, not the government bureaucrats. That should increase supply and lower sugar prices.”

If the bill passes, Bakst says further reforms should follow.

“It’s a good step forward,” Bakst said. “The sugar program should be repealed. It’s good to see that there seems to be a good amount of support for some sort of reform.”