An audience of about 60—including Hill staffers, U.S. International Trade Commission officials and economists—gathered Friday at a Rayburn building hearing room as the Cato Institute presented a briefing on the latest developments in the long-running saga involving the coddling of the sugar industry by the U.S. government at the expense of U.S. consumers and workers.
The briefing focused on the anti-dumping action initiated by U.S. sugar producers against their Mexican competitors. The domestic producers currently have about three-quarters of the U.S. market to themselves, and under the North American Free Trade Agreement, both countries can send unlimited quantities of sweeteners, without duty, across the other's borders.
Thanks to dumping rules that strongly favor domestic producers, however, Mexican companies face the possibility of crippling duties. That prospect has already boosted U.S. prices by 16 percent since the anti-dumping action was filed. Already, as one of the panelists noted, the U.S. sugar price exceeds the world price by 85 percent.
The briefing was titled "The Bitter Taste of Protectionism: How Congress and the U.S. Sugar Industry Kill Jobs, Raise the Cost of Living for Americans, and Compel U.S. Companies to Move Overseas." Speakers included Daniel J. Ikenson, director of the Herbert A. Stiefel Center for Trade Policy Studies at Cato; Daniel Pearson, a senior fellow at the Stiefel Center; and Ike Brannon, an economics fellow at the George W. Bush Institute and former chief economist to the House Energy and Commerce Committee The moderator was John Maniscalco, director of congressional affairs at Cato.
The panelists soundly condemned a system that's geared toward inhibiting the free movement of goods between neighbors. Brannon made the point that, as a policy decision, this one is awfully easy. Here, lower prices and higher domestic employment go hand in hand. As he put it, "These trade barriers not only harm consumers by charging them more but also hurts the growth of labor in the US. The only people who make monetary gains from these trade barriers are those small few making much more money than you or I."
Labor was a major point of discussion in the question and answer portion of the event, with some audience members raising fears that without trade barriers, the American sugar industry would collapse. But Pearson responded that "jobs were lost in the candy and breakfast cereal industry recently as companies closed their factories' doors in the US and have moved to countries with lower sugar prices." There are hundreds of thousands more jobs in industries that use sugar than in industries that grow and refine it. Pearson stressed that that anti-dumping measures only encourage outsourcing, leading to less lower employment and revenues at U.S. firms.
Ikenson closed his panel discussion by calling for "global liberalization" of the sugar trade. He recommended the U.S. government throw out the anti-dumping case against Mexico and instead use its resources to build a consensus around reform of what many consider the most coddled and protected industry in America.
One of the ironies of the U.S.-Mexican sugar dispute is that, if it ends in higher duties for Mexican companies, it seems inevitable that Mexico will retaliate against U.S. corn syrup exporters. In 2005, before NAFTA went into effect the U.S. sold 22,000 tons of high-fructose corn syrup in Mexico; last year, exports were 965,000 tons. The vast majority of HFCS exports from the U.S. go to Mexico. But for how much longer?