News & Insights

Washington, DC – During a Capitol Hill briefing hosted by the Cato Institute this afternoon, National Foreign Trade Council (NFTC) President Bill Reinsch urged policymakers to reform U.S. sugar policy to reduce barriers to trade, maximize U.S. exports, enhance the competitiveness of American farmers and encourage our trading partners to expand agricultural market access. Reinsch discussed the deficiencies engrained in the current system, which relies on government-regulated price floors, marketing quotas, and import restrictions, and prevents the sugar market from operating efficiently.

“The NFTC and our member companies are dedicated to creating the conditions for fair and open overseas markets for U.S. products so our economy can generate jobs through exports,” said Reinsch. “U.S. sugar policy, unfortunately, is often at odds with the goal of maximizing U.S. exports.”

He continued, “At the most basic level, all trade negotiations are a series of trade-offs among sovereign nations. Current sugar policy means that our negotiators must defend import quotas and high tariffs at the same time they are trying to get other countries to abolish quotas and reduce tariffs. This inconsistency does not enhance U.S. leadership.”

Reinsch also discussed that as result of U.S. import quotas, our trading partners have limited access to their agricultural markets or delayed opening them. “This has happened in several free trade agreements, including the pending one with South Korea. Our decision to leave sugar out of the FTA with Australia created a precedent that helped keep rice out of the Korea FTA,” said Reinsch.

In addition to underscoring how quotas, trade distorting subsidies and other barriers impact our trade relations with the rest of the world, Reinsch highlighted the cost to U.S. consumers. “All objective studies show the sugar program represents a net cost to our economy. An OECD estimate put that cost at $1.5 billion in consumer costs. This is consistent with a GAO estimate of $1.9 billion in consumer costs, and the U.S. International Trade Commission has estimated the costs of sugar import barriers at just over $1 billion,” he said.

In conclusion, Reinsch stated, “We believe that Congress will eventually need to look at reforms to the sugar program, especially if there is an agreement in the Doha Round of WTO talks. Almost any conceivable world trade deal will require a significant increase in U.S. sugar import quotas, and the program will need to adapt to that. In the short run, there is a step the government could take now to allow increased trade in sugar – temporarily increase sugar import quotas so that developing countries can supply more product into a market that is forecast to be record-tight this year.”

 

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