A Sweet Racket

The Sugar Industry in the US enjoys substantial benefits from regulations, subsidies and tariffs. The Sun-Sentinel writes:

The sugar program, known to its many critics as the “sugar racket,” is a tangle of price supports, which increase the cost of sugar in the U.S., and tariffs and quotas on imported sugar, which keeps cheaper sugar from reaching our market.

There is a long series of bills that make up this thicket of corporate welfare. Going backwards, the current situation is mostly supported by Senate Bill 884 of 1981. In the overview, it describes the provisions related to sugar:

Title IX: Sugar – Establishes a price support program for the 1982-1985 sugar beet and sugar cane crops.

Sets the support level for the period ending March 31, 1982, to approximate a raw sugar price of $.1675 per pound.

Requires the Secretary, as of October 1, 1982, to support sugar prices through 1985 as follows: (1) for sugar cane, $.17, $.175, $.1775, and $.18; and (2) for sugar beets, at a level in relation to the support level for raw sugar cane.

The USDA has good information about the program’s current implementation. From the overview:

The U.S. sugar program uses domestic marketing allotments, tariff-rate quotas (TRQs), and high out-of-quota tariffs to restrict the amount of sugar available to the U.S. market. In conjunction with market price support, the program also supports U.S. sugar prices, which are usually well above comparable prices in the world market.

A key element of the program is the tariff. Without the tariff, US consumers of sugar could bypass the other costs of the program by importing from other countries. How high is the tariff? From the USDA page:

The basic in-quota tariff is 1.4606 cents per kilogram (0.663 cents per pound) for raw sugar and 3.6606 cents per kilogram (1.660 cents per pound) for refined sugar. […] The out-of-quota tariff is 33.87 cents per kilogram (15.36 cents per pound) for raw sugar, and 35.74 cents per kilogram (16.21 cents per pound) for refined sugar.

The quota is “1,117,195 metric tons raw value (MTRV) for raw sugar, and 22,000 MTRV for refined sugar.” The US produces about 8 million metric tons of sugar annually. So the quota is a small fraction of the domestic production. How much does the out-of-quota tariff increase the price of sugar? The international price of sugar ranges from .28 to .40 cents per kg, making the out-of-quota tariff, in percentage terms, roughly 100%.

Lobbying by the Sugar industry is high for the size of the industry. This Washington Post article goes into some of the details of the political support the sugar program has. The article reads as a case study in Public Choice:

The special protection is a testament to the enduring Washington clout of one of the country’s wealthiest farming interests, including the politically connected Florida family that controls a substantial share of the world’s sugar market.

Sugar makers succeeded by gaining the support of a wildly divergent collection of lawmakers — rural and urban, tea party and liberal — who have little in common other than the presence of sugar operations in their states.

The program enjoys support from across the political spectrum:

The industry’s power was evident in the unusual alliances that formed in the House and Senate to thwart sugar-related measures over the past two years, turning ideological adversaries such as Sens. Al Franken (D-Minn.) and Marco Rubio (R-Fla.) into teammates operating from the same playbook.

“Removing the protections we have for our domestic sugar producers will do nothing but kill an American industry and outsource jobs to our competitors,” Franken said during a Senate floor debate this spring. Rubio, in the same debate, warned colleagues of the “risks to American jobs if reforms to our sugar program were to pass.”

The article also highlights a good example of the Tyranny of the Status Quo:

“I ran on limited government, fiscal responsibility and free enterprise,” Yoho said, “but when you’ve got programs that have been in place and it’s the accepted norm, to just go in there and stop it would be detrimental to our sugar growers.”

The total US sugar production is about 8 million metric tons annually. The price is about $0.40 per kg. That makes the US sugar production worth about $3.2 billion annually. According to the Washington Post article, the Fanjuls control 40% of this, or $1.28 billion. Spending a few million a year on lobbying to protect this racket is probably a good investment on their part. Conversely, if US consumers and confectioners pay, say, 20% more for sugar because of the protections, that’s a $0.62 billion loss to the economy. That’s on top of the lobbying cost, which is itself a dead-weight loss from the economy’s point of view.