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Colbert Report, August 19: I was interviewed on the Colbert Report about sugar policy, of all things. U.S. sugar policy is so absurd that I did not think it could be satirized, but Colbert managed just fine. Here's what I would have said if I hadn't been completely disconcerted by his dousing himself with five pounds of sugar:
The sugar "crisis": On August 5, several groups representing makers of processed foods wrote a letter asking the USDA to raise the quota on imported sugar because stocks are lower than they have been in years. Why? Because domestic sugar production is thoroughly governed by quotas, imported sugar is thoroughly controlled by quotas and tariffs, and high fructose corn syrup (HFCS) is increasingly diverted to ethanol. Got that?
Reminder about definitions: "Sugar" usually refers just to sucrose made from sugar cane and sugar beets; it is glucose and fructose stuck together. The other major sweetener is high fructose corn syrup (HFCS). It is also made of glucose and fructose, but separated. Sucrose and HFCS work the same way in the body and are hardly distinguishable physiologically. For the purposes of this discussion, I use sugar to refer to the sweetener refined from sugar beets and sugar cane, and HFCS for the sweetener made from corn.
Sugar protection policies: Even though it amounts to only 1 percent of agricultural production, U.S. sugar is the single most heavily protected agricultural commodity. No matter what the price on the world market, U.S. sugar producers and processors get paid a high price. Historically, this price has been two to three times higher than world market prices. Although this costs American consumers $2 billion to $3 billion a year in higher sugar prices, nobody much notices because it "only" amounts to about $10 per year per person over and above what you would pay for sugar anyway.
Quotas and tariffs: These are amazing, really. U.S. producers are allowed to grow a certain amount of cane and beets each year for which they are guaranteed a price set by USDA. Beets get 55 percent of the total quota allotment and cane gets 45 percent. This works like a closed shop. If you want to start growing beets or cane for domestic sugar production, too bad. Catch 22: You only get to have a quota if you already have a quota. As for tariffs: The 2008 Farm Bill says that 85 percent of total sugar in the U.S. must be produced domestically, and only 15 percent can be imported. That 15 percent comes in through quotas distributed among about 20 countries. Any other sugar they want to send us is subject to high tariffs, except from Mexico. Under NAFTA, Mexico can export as much sugar to us as it wants to at the favored price. But imported sugar is never supposed to exceed 15 percent.
International issues: Our agreement with the World Trade Organization (Uruguay Round) says we have to take a certain amount of world market sugar. But the 2008 Farm Bill restricts imports. Oops. The contradictions in these policies still have to be resolved. The processed food people think the USDA can raise the percentage. Can it? Hmmm. We don't know this yet.
Who benefits: A few thousand beet producers in about 15 states and a few hundred cane producers, and the sugar processors. They get paid amounts that are higher than world market prices. The countries that have sugar quotas also get higher prices for their sugar quotas. Producers of sugar cane and beets love this system. Florida cane producers defend it this way: "U.S. sugar policy ensures that jobs in rural America are not sent overseas, and that American consumers are not held captive by unreliable foreign suppliers of subsidized sugar." Like American-owned sugar plantations in the Dominican Republic, for example?
Who loses: According to the Government Accountability Office, everyone in America pays higher prices for sugar than we need to. This amounts to a transfer of wealth from 350 million of us to a few thousand sugar producers and processors. International sugar-producing countries that do not have quotas, those in Africa, for example, are also out of luck.
How this happened: The system started out in the Great Depression with the best of intentions. Despite endless attempts to get rid of sugar supports and let prices fluctuate according to the world market, Congress continues this elaborate and expensive system to protect sugar producers and processors. These groups have banded together in cooperatives so they avoid anti-trust laws. Even the New York Times thinks we should get rid of sugar protections. These groups, of course, are among the most generous and powerful contributors to congressional election campaigns. Even more, they are equal opportunity contributors: they give to both Democrats and Republicans. The Fanjul family in Florida is especially influential. In the best known example, Mr. Fanjul was able to get President Bill Clinton to take his call on a federal holiday when Clinton was in the midst of a tryst with Monica Lewinsky (source: the Starr report).
What about HFCS: The public now puts HFCS in the same category as trans fats: poison (it's not; it's just sugars). In response, makers of processed foods and beverages are starting to replace it with cane and beet sugar. As explained in the current Advertising Age, sugar is now at war with HFCS. HFCS used to be a lot cheaper than sugar, but its cost has gone up as more of it is used for ethanol. Supply is down; costs are up.
Other issues: As if all this wasn't complicated enough, sugar beets are largely genetically modified, leading more than 70 companies to say they won't use that sugar. Sugar cane production in the Southern states pollutes the Everglades, leading to billions of dollars in clean up costs. And the labor practices of sugar cane plantations have long been the subject of much investigative reporting.
So what's really going on? Food processors want cheap ingredients. Cheap sugar makes for relatively cheap junk foods and high profits for manufacturers. Current sugar policies make no sense in today's global marketplace and we all ought to be eating less sugar anyway. On average, we have 70 pounds each of sugar and HFCS available per year for every man, woman, and child in the country and a few pounds of other caloric sweeteners to boot. That's half a pound of sugary calories per day. Less of all of them would be better, no?
A final happy thought: Maybe the processed food makers' request--which is entirely self-interested--might lead to improvements in U.S. farm policy as well as relations with sugar-producing countries in Africa.
For more coverage on the sugar shortage, click here.
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Would U.S. sugar trade liberalization be likely to have any measurable effect on the rum market?
Just a minor, pedantic quibble. You said:
US sugar consumption is certainly high, but 70 pounds a year comes to a little under .191 pounds a day, or right around three ounces. That's still over 21 teaspoons a day, but it's not quite as bad as half a pound.
Other than that, interesting stuff! The temptation from a public-policy standpoint is to lift the tariff and simultaneously impose a sugar tax-- so that prices would remain at the levels consumers are used to. You could dedicate the resulting revenue to obesity prevention.
I understood Professor Nestle to mean that we have 70 pounds of sugar PLUS 70 pounds of HFCS available per year per person. Total of these two sweeteners is thus .382 pounds per day; factor in the other few pounds per year of caloric sweeteners she mentions, and the daily total does approach .5 pounds.
Some of these sweeteners are mixed into foods we don't think of as needing sweetening. Others are "hidden in plain sight" - for example, most people don't realize that non-diet soda contains roughly 9 teaspoons of sugar.
I like your idea about lifting the tariff and imposing an equivalent sugar tax. Clearly, the market can easily bear the current price. I doubt even a slight increase - such as the recently proposed soda tax, which would amount to something like 3¢ per can - will change many habits or bankrupt many soda drinkers.
I think the approximation of 70 pounde of each is available, is the correct reference. When I did a query on the listed source, I came up with the following info on U.S. per capita food availability for caloric sweeteners. The weights are all for dry weight, pounds per capita/per year, for the year 2007:
Cane and beet sugar 62.0
Corn sweeteners 72.9
Edible syrups .44
Honey .98
Total caloric sweeteners 136.3
Sugar consumption is total U.S. sugar (cane and beet) deliveries for food and beverages; does not include sugar imported in blends and mixtures. Corn sweeteners contain estimates of sorgo, maple and sugarcane syrup, edible molasses, and edible refiner's syrup. Calculated from unrounded data.
Source: USDA/Economic Research Service. Last updated Feb. 27, 2009.
Oops. I thought the "70 pounds each" referred to "each American" not "each sweetener." But I agree now that I misread it.
Damn. That's a lot of sugar.
That statement might need to be qualified.
" Two papers in the journal PNAS in 2007 and 2008 showed that glucose and fructose act quite differently in the brain (hypothalamus) - glucose decreasing food intake and fructose increasing food intake. Both of these sugars signal in the brain through the malonyl-CoA signaling pathway and have inverse effects on food intake. " Link.
The problem is not really high prices or even higher prices than would prevail under a free market. To really understand why the TRQ (and other trade barriers) are undesirable, you have to start thinking in terms of the allocation of resources. We have productive resources, land, labor and machinery and we have to decide what and how much to produce of millions of goods and services. In the case of sugar, too many of our resources in Florida, Texas, and Louisiana (and elsewhere) are being mistakenly used to produce sugar. It would be better if we imported sugar and used our resources to produce other stuff. The loss (OK, deadweight loss, if you want to be technical) from the misallocation of resources is what should be of concern.
It is true, of course, that sugar producers favor the TRQ from purely self-interested motives and they are, in fact, richer because of the TRQ. BTW, a simple -- well, it's actually a somewhat complicated -- supply and demand graph can be used to show that the TRQ enriches the lucky few foreigners with access to the US market. So, the TRQ is not only bad because it causes resource misallocation, it leaks to foreign suppliers as it transfers surplus from consumers to domestic producers. That makes anyone who studies the TRQ shake their head even more at how goofy it is.
But keep your eye on the ball -- optimal resource use. It's just like monopoly. Everyone hates monopoly because they charge high prices, but to an economist, that's not the real problem. It's the fact that monopoly produces too little output and the resulting resource misallocation is the real problem.
Thanks for an entertaining Colbert segment and follow up web page.
Totally off point, but I work with commercial fishermen... why are sugar industry/farmers given so many protections as well as quality standards for product not afforded to seafood consumers and fishermen? We are consuming unknown product and decimating these fishing families. They are paid less than they were 30 years ago and subject to unbelievable regulation while product fed on waste and antibiotics are brought in with practically no oversight and without tariff to allow competition.
Sugar is demonstrably a "poison" when eaten in excessive amounts, such as half a pound per day. Glucose is the digested result of all dietary sugars, flours and starches, especially the highly refined products produced since the early 1900's, therefore including these in the count raises the daily intake of glucose well beyond half a pound per day. Excessive glucose in the body has been shown to be the source of the entire metabolic syndrome of modern illness, including diabetes, obesity, atherosclerosis and high triglycerides, which is to say, most of the key markers of heart disease, along with a host of other modern conditions including runaway cancers, which cells also thrive on blood glucose (see Volek and Feinman's "comprehensive review of the literature" in "Nutrition and Metabolism" 2005). The rate of growth of metabolic/cholesterol/heart disease in the last century is precisely consistent with the intake of highly processed flour and sugar products. Sadly, highly processed foods are simpler and cheaper to make, so the self-interested profit motive is in full effect here. Meanwhile, prescribing increasingly expensive medications to remedy what is essentially an epidemic of dietary excess keeps the medical and pharmaceutical industries indirectly "subsidized" as well. The entire system is tragically geared to excessive consumption of non-nutritional foods, encouraging epidemic disease, higher medical and insurance costs, and artificially subsidized industries.