The Sugar Lobbying

In the Global Economy course I am taking at Stern, the professor used U.S. sugar industry to illustrate the impact of trade barriers on the well-being of the society. The huge subsidy to the industry, he said, only benefits a small group of growers and refineries, while compromising the interest of consumers and the broad economy.

As Americans continue to pay several times more for sugar than their neighbors in Mexico, the country’s few than 6000 sugar farmers thrived in spite of losing efficiency to their counterparts overseas.

Apparently, lawmakers were too busy to review international trade theory and the difference between absolute advantage and comparative advantage. In return for the hefty contribution they have received from sugar associations, senators and congressmen are focusing on guaranteeing hundreds of millions of aid dollars for growers in Midwest and Gulf Coast.

And their efforts are starting to pay off, a $1 billion, 10-year subsidy for sugar sector was approved recently as part of a farm bill.

The aid, which will eventually be billed to every taxpayer, appeared such a win-win solution for both sugar plants and politicians that elected representatives from outside of the traditional agricultural states have joined the rally.

According to the Washington Post, Rep. Carolyn B. Maloney, representing Queens and Manhattan's East Side, voted against a measure that would have thwarted the new subsidy plan.

A few days after she cast the NO vote, however, Ms. Maloney hosted a fundraising dinner at Bullfeathers restaurant on Capitol Hill that raked in $9,500 in donation from sugar growers and refiners.

She is not along in the east coast. A number of Eastern lawmakers have jumped out to defend the interest of the shrinking sugar industry. Behind their rhetoric, however, is millions of contribution sugar maker have spent on lobbying.

So far this year, nine sugar farm or refinery groups have made more than 900 separate contributions that amounted to nearly $1.5 million to candidates, parties and political funds, according to CQ MoneyLine.

The result: consumers and food processors have to spend between $1 billion and $2 billion more annually on sugar and a variety of related products. Meanwhile, the new sugar subsidy would cost taxpayers an additional tens of millions of dollars a year.

This is the cost lawmakers are trying to impose on taxpayers in order to protect the U.S. from an invasion of Mexican sugar, a scenario that NAFTA, initiated by the U.S., is meant to avoid.