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Sugar headache

Price supports and import quotas that insulate U.S. growers from global market realities hurt consumers.

February 18, 2007

AMERICANS PAY ABOUT double the world market price for sugar, a hidden tax that hurts everyone with a sweet tooth. Many beverage and food makers catering to that sweet tooth have long used corn syrup instead of sugar because it's cheaper, but the price of corn syrup is beginning to rise. So now would be a good time for the U.S. government to revisit its destructive farm policies.

This is a classic case of a narrow, vocal lobby -- sugar growers -- benefiting at the expense of the larger economy. The latest victim of high-priced sweeteners is Atlanta-based Coca-Cola Enterprises Inc., the largest bottler of Coca-Cola products, which announced last week that it would cut 3,500 jobs because of a $1.1-billion loss in 2006. Other soft-drink makers, confectioners and food companies also pay a steep price for the complex system of price supports and import quotas aimed at protecting U.S. sugar growers by insulating them from global market realities.

More U.S. food makers probably would use sugar rather than corn syrup if they could pay the real market price for sugar and have access to more of the sweetener. Compounding the awful distortions created by the current quota system is the fact that corn syrup prices are rising so sharply because more of the U.S. corn crop is being diverted to make ethanol, which makes little sense because ethanol can be made much more efficiently from -- you guessed it! -- sugar. It's hard to even keep track of all the ways in which the nation's sugar protectionism is damaging.

Brazil produces a surplus of sugar-derived, low-cost ethanol. We import very little because, in order to protect corn growers, we slap it with a 54-cents-per-gallon tariff. Meanwhile, to protect our sugar growers, we impose import quotas on Brazilian sugar, which means we can't even make ethanol at home from cheap sugar.

This kind of mind-boggling waste probably won't end anytime soon. There was a glimmer of hope for improvement last summer, when the U.S. and Mexico settled a trade dispute that granted Mexico unlimited sugar exports to the U.S. starting in 2008. Normally, that would mean lower sugar prices for Americans. Yet under its proposed 2007 farm bill, the Bush administration is seeking new trade-distorting powers: When Mexican sugar enters the market, the government wants more power to order domestic sugar growers to cut production, reducing supply and thus keeping prices artificially high.

If there is any light at the end of this tunnel, it may come from President Bush, whose energy initiatives would boost production of ethanol and probably push corn syrup prices higher. That could prompt beverage and food companies in search of a cheaper alternative to corn syrup to join the fight against the sugar lobby. Common sense doesn't go far when it comes to farm policy; maybe corporate lobbyists can do better.

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