Vince Smith’s op-ed in the Hill is based on a false premise and makes several main points that we’ve repeatedly debunked.
First, Smith’s op-ed and the GAO report both base their arguments on the false notion that global sugar markets are competitive and are not grossly distorted by foreign subsidization of sugar and ethanol sectors. For example, GAO promotes the falsehood that Brazil does not subsidize its sugar sector. The report adopts the premise that comparing the U.S. market to the distorted world dump market for sugar can provide meaningful measures of consumer and producer costs and benefits. That naïve premise causes incorrect conclusions about the U.S. sugar market, which have been repeatedly debunked.
Three examples include:
1.“American consumers pay twice as much” – False: Roughly 80% of the supply of sugar around the world is sold at a higher price than the ‘world price’ used in this comparison. The world market for surplus sugar is well below the world cost of production. The artificially depressed ‘world price’ is not the price paid for sugar by consumers in most countries.
2. “Only benefits 0.02 percent of farmers” – False: The U.S. sugar industry is comprised of 11,000 sugarbeet and sugarcane farmers, supports more than 151,000 jobs in over two dozen states, and contributes more than $23 billion to the economy. The sugar program ensures a strong and resilient domestic supply chain for sugar that provides just-in-time delivery of sugar to food companies and households.
3. “Shouldn’t blame food manufacturers” – False: Sugar producers do not blame our customers for a 33% increase in jobs in the U.S. confectionery industry, according to the U.S. Census. Nor do producers blame food companies for reporting record earnings to Wall Street. Yet, the op-ed itself acknowledges that food manufacturers have enjoyed increased revenues during this period of inflation while farmers’ margins are being squeezed by higher input costs The op-ed and GAO fail to acknowledge all the ways in which having a domestic supply of an essential ingredient benefits food manufacturers.
Ultimately, we are disappointed that GAO published a one-sided report that does little to inform Congress as they deliberate the new Farm Bill. We observe that the author of the op-ed and GAO continue to make the same mistakes as they have over the years. A main fault with their analysis lies in the assumption that one can compare a competitive U.S. market to a distorted world sugar market in order to develop measures of the costs and benefits of U.S. farm policy. Assuming that food companies will pass along savings to their consumers in the form of lower costs is similarly naïve and has been empirically debunked in the economics literature.