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Too sweet a deal

Sugar subsidies are costly. As it did with peanuts and tobacco, Congress should consider quota buyouts.

April 30, 2007

IF YOU ADDED the combined annual revenues of the 75 corporate giants, trade associations and lobbying firms that jointly urged Congress last week to reform U.S. sugar policy, they would surpass the gross domestic product of most countries. Yet when stacked against the political power of the $3.8-billion-a-year U.S. sugar industry, even the combined forces of Coca-Cola, Unilever and the United States Chamber of Commerce look like pedestrians trying to stop a tank. We wish them the best of luck.

American consumers pay about twice the world market price for sugar, thanks to a complicated system of price supports and import quotas. It isn't just sugar prices that are affected -- any food or beverage maker that uses a sweetener faces higher manufacturing costs, which they pass on to their customers. That's why such a vast collection of corporate interests is lining up against the government subsidies.

Congress is negotiating the 2007 farm bill, which will set U.S. agricultural support levels for the next five years. So far, the bill is not shaping up to be much of an improvement over the 2002 version, a $20-billion-a-year extravaganza of agribusiness welfare. Despite the heavy damage that sugar policy has inflicted on consumers and the environment, the odds of reform this year are slim. That's because, for the anti-sugar lobby, this is just one concern of many; for sugar growers, it's a life-and-death battle. Sugar is grown in 19 states, and growers contribute heavily to congressional campaigns.

But even if Congress can't find the courage to beat sugar growers, it might be able to buy them out. Not long ago, peanuts and tobacco enjoyed similar protections -- the government artificially inflated their prices by restricting imports and setting quotas on how much domestic producers could grow. But in 2002, the government bought back production quotas from peanut farmers, then made a similar deal with tobacco growers in 2004. In essence, these farmers gave up all market protections in exchange for set payments over a finite number of years.

Such agreements shift the burden of farm protection from consumers to taxpayers, which isn't much of a bargain in the short term. But once the payments run out, taxpayers are off the hook. It's an investment in sane agricultural policy, lower food prices and fair trading partnerships.

Sugar policy remains one of the worst examples of U.S. protectionism. Congress should give quota buyouts a closer look.

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