Nothing Sweet About Sugar Subsidies

COMMENTARY Agriculture

Nothing Sweet About Sugar Subsidies

Mar 7, 2004 3 min read

Former Director, Center for Data Analysis

Norbert Michel studied and wrote about financial markets and monetary policy, including the reform of Fannie Mae and Freddie Mac.

Wonder if U.S. Sen. Mary Landrieu has ever run her views on free trade past a real economist?

I got to pondering this question recently as I was accepting my Ph.D. from the University of New Orleans. Having read two days earlier that Sen. Landrieu, like many Louisiana politicians, opposes a recent move to phase out import quotas on sugar, I couldn't help but think she should bounce this idea off the man dishing out the diplomas that night -- UNO chancellor and highly respected economist Timothy Ryan.

If she ever does, I hope that Ryan, who introduced the senator as his "longtime friend," sets her straight. That he'll explain to her that, even if it means short-term hardships for some workers, free trade holds more promise for Louisiana and the nation than her efforts to "protect" sugar or any other crop or industry. That he'll point out that those she wants to "protect" through trade barriers -- tariffs and import quotas -- would remain in danger of losing their jobs, and the best way for Louisiana and the nation to help those workers is not to meddle with the process and divert resources from their best use.

The fact is, because of foreign competition -- which is not going away -- American farmers no longer can earn sufficient profit from sugar. But rather than switch to more profitable crops, these farmers lobby Congress to restrict imports from foreign countries or levy tariffs to make foreign sugar uneconomical. As a result, they prolong their precarious positions, and Americans pay two to three times what the rest of the world pays for sugar.

Worse yet, most of the support money goes not to struggling family farmers but to megafarms. Indeed, one Florida family, the Fanjuls, receive nearly half of all the benefits from the sugar-support program.

Perhaps Ryan subscribes to the "moderate" view on tariffs -- that keeping the price of domestic sugar artificially high for a few years will enable the industry to restructure and move toward more profitable endeavors. But for how many years? Louisiana sugar producers have been protected by tariffs almost continuously since 1816. Import quotas on sugar have existed since 1934, except for one eight-year break that ended when President Reagan re-established them in 1982.

Despite the assistance, the industry has continued to shrink on its own. The number of sugar mills in the state has fallen from 46 in 1960 to 24 in 1980 to fewer than 20 today, even though the mills have become more productive. And now Sen. Landrieu -- and almost every other Louisiana politician -- opposes the Central American Free Trade Agreement, a plan that would double import quotas for sugar but take 15 more years to do it.

What if, rather than propping up Louisiana's sugar industry since 1934, market forces had instead been allowed to dictate the best uses of the state's land and labor? What would have become of the state's great sugar plantations? Would they have switched to more profitable, more dependable crops or -- with the help of those dollars that went to sugar support -- to non-agricultural uses?

We can't say for sure, but we can say that we'd have paid less for sugar over the past 70 years. We also can say we would've spent far fewer tax dollars to enrich a few wealthy landowners and that more of our land and labor would have been used for more profitable ventures.

Moreover, anyone who followed the state's recent election for governor heard two words repeatedly -- "brain drain." It's a huge issue in Louisiana, and both candidates rolled out plans to stop the exodus of the state's educated citizens and create more opportunities for them at home.

Might more prudent use of the millions that went to "save" the sugar industry over the last 70 years have prevented this brain-drain crisis? Again, we can't say for sure. But we can say that when resources are diverted from their best use for decades on end, it forces those who are not members of the privileged sugar families to go elsewhere for opportunities.

Perhaps Chancellor Ryan can inform his "good friend" of that, and Louisiana's junior senator will consider supporting the Central American Free Trade Agreement.

Norbert Michel, Ph.D., is a policy analyst in the Center for Data Analysis at  The Heritage Foundation, a Washington-based public policy institution.

First appeared in The Shreveport Times