Daniel Drezner posts on a Chicago Tribune story about job losses in the U.S. hard candy industry caused by U.S. sugar import restrictions: "Protectionism never tasted so sour". The key point in the story: high U.S. sugar prices, associated with tariffs and quotas that keep U.S. sugar prices above world levels, are forcing U.S. hard candy producers to "outsource" production overseas.
"...In the last three years, nearly half of all U.S. candy cane production has shifted to Mexico, industry experts say...
But the story of the Mexican candy cane isn't your typical tale of American manufacturers chasing lower wages. It's more about the cost of sugar than the cost of labor...
In Chicago, for example, Brach's Confections plans to shut its plant in 2004, forcing about 1,000 workers out of their jobs. The Chicago area, the center of the U.S. confection business, has lost an estimated 3,000 candy-related jobs since 1998..."
I've just finished reading Douglas Irwin's Free Trade Under Fire (Princeton University Press, 2002.) I'd strongly recommend it. Irwin makes the case for free trade, focusing especially on the issue of jobs. The second half of the book is on the history, political economy and law of U.S. trade policy.
Relevant here are some of Irwin's comments on sugar restrictions (and what we're getting for this sacrifice of candy jobs):
"...As already noted, the United States assists the domestic sugar industry through price supports and import restrictions in the form of a tariff-rate quota. Under a tariff-rate quota, sugar-exporting countries are given a certain (small) quantity that they can sell in the United States at the regular tariff, and any exports beyond that specified quantity are subject to a tariff rate of nearly 150 percent. As already noted, the sugar import restrictions and price supports cost domestic users of sweeteners $1.9 billion in 1998. Domestic sugar beet and sugarcane producers reaped $1 billion as a result of these policies, with most of the benefit accruing to sugar beet growers. The net loss to the economy is $900 million annually, $500 million due to economic inefficiency bred by the policy and $400 million in the transfer of quota rents to foreign exporters." (page 59)
So, we are sending $400 million a year to foreign producers in order to engineer a transfer one billion dollars from consumers to domestic sugar producers (and to destroy an additional $500 in domestic wealth from the inefficiencies associated with the restrictions- this $500 million is in addition to the $400 we're giving to foreigners).
"...Sugar imports are restricted to maintain domestic price supports for sugar beet and cane producers. The benefits of these restrictions are highly concentrated because Congress has not limited the amount of support that large farms can receive. For example, one farm received over $30 million in benefits from the sugar program in 1991, and just 0.2 percent of all sugarcane farms - thirty-three in total - received 34 percent of the entire program benefits. The family of Alfonso Fanjul single-handedly supplies the United States with about 15 percent of its sugarcane through its land holdings in south Florida and the Dominican Republic, collecting somewhere between $52 to $90 million in benefits from the price supports on U.S. production and the quota rents on Dominican sugar exports. Not surprisingly, the Fanjul family could afford to make nearly three hundred thousand dollars in campaign contributions in 1988..." (page 61)
Irwin is drawing on sources written in the early 1990s, so his numbers are 10 years old.
Drezner points to relaxed sugar restrictions in the new Central American Free Trade Agreement (CAFTA). Robert Tagorda links to Reuters stories which elaborate and discuss the domestic sugar producers' response and sources of influence: "Big Sugar".
Why are a small number of sugar producers able to get Americans to incur $900 million in expenses in order to transfer an additional one billion to them? Tagorda links to Josh Chafetz, who explains one theory: "THE COSTS OF PROTECTIONISM"