Story URL: http://news.medill.northwestern.edu/chicago/news.aspx?id=227985
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Laura Bradley/MEDILL

Sugar subsidies have made domestic prices twice the global price, said Sen. Mark Kirk (R-Ill.) and Rep. Danny Davis (D.-Ill.) at a Sunday press conference. This market distortion, they said, has sent thousands of manufacturing jobs overseas.


Is ending sugar subsidies a sweet proposition?

by Laura Bradley
Feb 13, 2014



As one of America’s sweetest holidays approaches, Sen. Mark Kirk (R-Ill.) and Rep. Danny Davis (D-Ill.) want to end sugar subsidies, saying the U.S. Sugar Program has shipped 130,000 jobs overseas in the last 15 years by inflating domestic prices and leaving 600,000 jobs at risk.

"Chicago really has been the candy capital of the country, and we’ve lost thousands of jobs around this issue needlessly,” said Ira Cohen, director of issues and communication for Davis. “We actually incentivized the moving of those jobs overseas to places like Argentina and Canada.”

At a Sunday press conference, the congressmen and Bill Kelley, vice chair of Jelly Belly Candy Company, said it is time to end the U.S. Sugar Program, which mainly sets minimum domestic sugar prices and limits imports through tariffs. They said this program has ballooned domestic sugar costs to twice that of global prices.

“There’s no reason why we should artificially inflate the cost of sugar. It doesn’t really help anybody,” Cohen said. “The bill that’s currently before the Congress makes sure that the vast majority of sugar producers receive the supply they need while keeping the price of sugar competitive.”

Programs that alter prices and artificially regulate the market tend to be economically harmful, according to Tim Classen, associate professor at the Quinlan School of Business at Loyola University Chicago.

“All of these kinds of market distortions limit the efficiency of how a market should work,” Classen said.

These subsidies represent an outdated view of the agricultural industry but are also unlikely to go away in the foreseeable future, according to Classen.

“The small farmer that we thought of as protecting with the farm bill has disappeared,” Classen pointed out. “The idea of farmers needing protection to me is kind of baffling.”

Although those in favor of the subsidies tend to imply they protect family farms, Kelley2wu said this is not true.

“This is agri-business,” Kelley said. “These are huge farms. We’re not throwing Ma and Pa off the sugar beet farm.”

Kelley said he has worked on this issue for 30 years as more and more candy companies, and the manufacturing jobs that go with them, have moved overseas.

“American candy manufacturers should be allowed a level playing field, and the examples are all over the place,” Kelley said. “In this country we only have one candy cane manufacturer left. We only have one gumball manufacturer left. Life savers were once made in Michigan; they’re now made in Canada.”

Classen said ending sugar subsidies could initially bring some market shifts. Domestic production, he suggested, could drop. But removing the import restriction could also mean a reduction in sugar prices, as supply increases. Right now the subsidies basically act as a price floor, he explained, raising prices for confectioners, which ultimately pass to consumers.