Sweet for farmers- sour for everyone else
Monday, February 1, 2010
Coming just days after WTO officials vowed to continue fighting domestic protectionism, here is an example of the harm caused by “protection” sought by vested interests – at the expense of everyone else.
Farmers in the U.S. enjoy protection against more efficient foreign producers of cane sugar: U.S. produced sugar has been, on average, twice as expensive as world sugar prices since 1980. This protectionism cost U.S. businesses and consumers $2.5 billion in 2009.
Sugar imports in to the U.S. are capped at 2.2 million metric tons a year- around only a quarter of total U.S. consumption. Consequently, consumers and businesses are forced to satisfy the remaining 75 per cent of their demand from the more expensive U.S. farms.
The usual argument for protectionist measures focuses upon protecting domestic business and employment interests- but examples like this demonstrate that they do neither. Businesses have to pay more for their sugar, consumers get less bang for their buck, so production and employment opportunities decrease. Foreign investment in sugar related industries is deterred by the higher prices. Across the developing world, farmers who can utilise low labour wage costs to produce cheap sugar have their export markets cut off. In short these quotas mean everybody loses.
Everyone that is apart from the landowning farmers who enjoy the protection they have lobbied so hard for over many decades. They continue to reap the rewards of guaranteed markets, knowing full well that the inflated prices consumers are forced to face will eventually end up lining their pockets.
Protectionism often incurs costs that are (purposefully) hidden and difficult to appraise- in this instance the costs are clear to see. Whatever arguments farmers use to continue justifying the indefensible subsidies they receive flew out the window long ago. It’s time to scrap the heinous U.S. Farm Billand give global agricultural trade the boost it needs.