American sugar industry gets a sweet deal

A bi-lateral trade agreement between Australia and America has been stalled for over 10 months, hinging on negotiations with the U.S. sugar industry. Yet, American sugar growers, who produce less than one percent of domestic farm goods, are fighting to prevent sugar imports from Australia, which currently account for about one percent of American sugar consumption.

According to observers:

The heavily protected sugar industry is to blame for domestic prices that are three times higher than the world market price.

The Sugar Users' Association – which represents companies that buy sugar as a manufacturing input – claims that they have cut 7,500 to 10,000 jobs over six years due to high sugar costs.

U.S. manufacturers support the trade agreement, since it would eliminate the 5 percent tariff on American manufactured goods.

However, sugar growers argue that opening the domestic market to more sugar imports would threaten 61,000 industry jobs, and they have contributed $722,000 to both Democrats and Republicans through 15 organisations.

While U.S. exports worldwide declined from 1998 to 2002, exports to Australia grew by 6.4 percent. Some lawmakers worry that exempting the sugar industry from free competition would open the door for other industries to claim exemptions as well, thereby doing away with a fruitful trade agreement with Australia.

Sources: Michael Schroeder, Sugar Growers Hold Up Push For Free Trade, Wall Street Journal, February 3, 2004 and Editorial, Sweet Sabotage, Wall Street Journal, February 3, 2004.

For WSJ article texts (subscription required): http://online.wsj.com/article/0,,SB107576574874518570,00.html
http://online.wsj.com/article/0,,SB107576946832918704,00.html

For more on International (Tariffs and Trade Barriers) http://www.ncpa.org/iss/int/

FMF Policy Bulletin\24 February 2004