Proposed Sugar Subsidies Could Cost Poor Countries

Published online: Dec 10, 2006 American Sugar Alliance
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WASHINGTON, DC--Developing nations could lose $430 million in annual U.S. sugar sales if food manufacturers convince Congress to adopt sugar subsidy checks, a sugar industry economist said today at a farm policy and trade conference. Under the sugar subsidy proposal, U.S. sugar prices would plummet well below world average production costs. Domestic producers would supposedly receive federal checks to make up the price difference, while poor foreign farmers would get no relief. The United States, which is the world's second largest sugar importer, purchased $810 million worth of raw sugar last year. Most of those imports came from 38 developing countries and would have been valued at just $380 million if the food manufacturers' plan had been in place, said Jack Roney, the director of economics and policy analysis for the American Sugar Alliance. The proposed sugar subsidy scheme would also cost U.S. taxpayers $1.3 billion a year, Roney noted. And the cheaper sugar wouldn't translate into cheaper candy for shoppers, he said, because food manufacturers historically pocket price savings to boost profits. "This is just a misguided proposal," he said of federal sugar checks. "Developing countries would lose, taxpayers would lose, and U.S. sugar farmers would lose. The only winners would be multi-billion-dollar companies that don't need government handouts." Roney used Europe as an example of the pain that poor countries would feel. The European Union is reducing its sugar prices by 36 percent-to a price just above the U.S. sugar price-and is giving European sugar producers lucrative compensation payments. Producers from developing countries will receive virtually nothing to cushion the financial blow. "The EU's policy shift will take about $700 million a year out of the pockets of the people who need it the most," Roney explained. "Doing the same in America would compound the problem and make poor exporting nations even poorer." U.S. sugar producers, who currently get their returns from the market instead of government subsidy checks, oppose the food manufacturers' subsidy plan because of its cost and implementation hurdles. They are asking Congress to continue the current no-cost sugar program in the next Farm Bill. This policy, they contend, is vital to America's food security and helps keep prices affordable and stable.