Reforming foreign policies takes time, but this strategy will keep a diverse and reliable domestic supply chain humming in the meantime.
By Thomas LeCrone
As a former executive for what was the largest sugar company in the United States, I’m quite familiar with U.S. sugar policy. And since returning to Pennsylvania, I’ve become very acquainted with the opposition large candy companies have to it.
Confectioners claim the current U.S. sugar policy is harming their businesses and bottom lines by propping up high sugar prices. Sugar producers claim “Big Candy” is trying to outsource their jobs to heavily subsidized sugar-exporting countries like Brazil. They also say cheap foreign sugar would only help rich candy companies get richer since lower ingredient costs are never passed along to consumers.
Strong words from both sides, but after dealing with both industries, I don’t see things quite so starkly. These fierce political rivals have a lot in common.
Confectioners and sugar growers alike want to achieve the same outcome: a free sugar market where everyone competes on equal footing. The disagreement arises over how to achieve that goal.
Rhetoric aside, lawmakers have only three possible choices.
Option one is to let sugar imports from Brazil and other countries with extensive subsidization flood the U.S. market, undercut domestic sugar prices and drive U.S. producers out of business.
To some, this constitutes a “free market” despite the foreign subsidies, but it holds food security ramifications for America. Consumers would become dependent upon unreliable foreign suppliers for an ingredient found in everything from snacks to baked products, cereal, yogurt and some beverages.
The last time America was dependent on foreign sugar was during WWII when sugar was the first commodity rationed and the last commodity removed from the rationing list due to its scarcity.
The European Union (EU) learned this foreign-dependence lesson the hard way after it made a similar policy decision in 2006.
Once a flood of subsidized imports crippled the EU sugar industry, domestic production diminished and 120,000 jobs were lost. When foreign suppliers stopped shipping needed quantities of sugar, the result was massive shortages and price spikes for grocery shoppers.
This option is unworkable, and U.S. candy makers have told Congress that they have no interest in the extinction of domestic sugar producers.
Option two is to have U.S. taxpayers subsidize sugar producers at the same rate as foreign competitors to level the playing field. Considering the no-cost pricetag of current sugar policy and tight federal government budgets, a subsidy proposal would be difficult to pass.
Confectioners found this out in 2006 after they proposed sending U.S. sugar producers $1.3 billion a year in taxpayer subsidies – a proposal sugar farmers and lawmakers soundly rejected.
Option three is to keep the current system in place while foreign subsidies are eradicated so a free market can emerge. This option still allows massive levels of imports but won’t let unneeded, subsidized sugar flood the market and threaten the domestic supply chain.
It’s not perfect for candy makers, because reforming foreign policies takes time, but this strategy will keep a diverse and reliable domestic supply chain humming in the meantime.
With sugar prices plunging 54 percent in the last two years, this option should be particularly attractive, since current market conditions have muted confectioners’ past complaints about prices.
Instead of fighting one another, these two powerful lobbying forces should rally behind option three and fight market-distorting subsidies in Brazil, Mexico and elsewhere.
When a free market emerges, sugar producers have publicly pledged to end all U.S. tariffs and let the best business people prevail – the same end goal that the candy industry has championed.
Thomas LeCrone is President and CEO of the LeCrone Management Group in Lancaster, PA. He previously worked for The Great Western Sugar Company.
