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Uncle Sam's Surprising Role: Sugar Cartel Kingpin

April 16, 2018 in Economics

By Colin Grabow

Colin Grabow

Kirk Vashaw, CEO of the Spangler Candy Company, employs more
than 500 workers at his company’s Bryan, Ohio, production
facility. He says he’d like to hire more, and with 900
applicants for jobs last year there is no shortage of interest. But
Vashaw says that the federal government’s meddling prevents
the math from working out.

To bring them on, Vashaw asks
but one simple thing
of Washington policymakers: “Let us
buy sugar on the free market.”

Vashaw’s request likely comes as no surprise to those
familiar with the federal government’s sugar program. Despite
widely-held perceptions of the United States as a free-market
exemplar, the buying and selling of sugar in this country is
wrought with central planning and government manipulation.
Incredibly, the goal of such intervention is not to lower
costs to consumers but rather to raise the price of sugar beyond
what it would otherwise be.

Rooted in the Great Depression, the modern-day incarnation of
the sugar program sees the federal government provide loans to
sugar processors in exchange for the provision of sugar as
collateral. To ensure the processors actually pay back the loans
instead of surrendering the collateral if sugar prices dip too low,
the government boosts the cost of sugar. This is accomplished
through supply restrictions, including domestic production quotas
as well as limits on the amount of sugar that can be imported
either tariff-free or at low rates.

The thin rationales
offered for why the sugar program should be maintained underscore
the urgent need for its deep reform, if not outright
abolition.

Uncle Sam is effectively the ringleader of a sugar cartel. As a
result, both American families and businesses ranging from bakeries
to breakfast cereal producers face sugar costs that are
often twice that
found on the international market.

The cost of this policy to consumers is considerable, with

recent research
from the American Enterprise Institute placing
the toll for households at $3.4 billion to $4 billion.

While households may have little choice but to pay the higher
prices, some companies have opted to close factories in the United
States and move operations to Canada or Mexico, where the price of
sugar is far lower. In 2002, Kraft Foods announced the closure of
its Life Savers plant in Michigan and relocation to Canada, with
the
estimated $90 million
it would save in sugar costs over 15
years figuring prominently into the decision. Even smaller candy
makers such as Los Angeles-based
Adams & Brooks
,
Bob’s Candies
of Albany, Ga., and, yes, Spangler Candy
have all shifted some of their production to Mexico …read more

Source: OP-EDS

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