Why do Americans pay more for sugar?

Most Americans who start the day stirring a spoonful of sugar into their coffee would be surprised to learn they generally pay more for the sweetener than residents of other countries buying it on the global market. Major American commodities traders track two prices for sugar – a world price and a more expensive U.S. price.

Why the difference? According to the Wall Street Journal, “U.S. prices tend to be higher than world prices because the U.S. restricts sugar imports as part of the [U.S. Department of Agriculture’s] price-support program” for sugar (subscription required). One USDA economist recently estimated this price-support scheme could cost American taxpayers $80 million in 2013 on top of requiring U.S. consumers to pay artificially higher prices for raw sugar, candy and other confections.

Given these sour facts and movement in the U.S. Congress to reform the sugar program, I’m not surprised the American Sugar Alliance is trying to change the subject to defend its price supports. Last month, the group released a report arguing that Congress must maintain current U.S. sugar policy “to shield consumers from foreign market manipulation,” particularly by Brazil which subsidizes sugar production according to the American Sugar Alliance.

The influential Cato Institute took a look at the group’s report and summarized its findings succinctly:

The sugar lobby for years have been complaining that we need the sugar program, which keeps prices high for producers by keeping imports strictly controlled, in order to enable “reliable” (i.e., managed) access to sugar. Now they think sugar is too available (i.e., cheap)? For sure, if I was a Brazilian taxpayer, I would baulk at the thought of subsidising (if that in fact is the situation) the sugar addictions of my richer neighbours to my north, but as a consumer? Muito obrigado! The sugar lobby’s talking points are getting ever more creative. But none of them are valid.

I added emphasis on the last line above and was tempted to end my rebuttal there! However, the Brazilian Sugarcane Industry Association felt obligated to set the record straight on this misleading report which overstates Brazilian support for domestic producers and turns a blind eye to comparable programs in the U.S. You can download our point-by-point response here, and see for yourself how the American Sugar Alliance’s report reveals “the desperate need of the American sugar industry to keep the U.S. market closed and protected from competition.”