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Source link: http://archive.mises.org/13428/not-exactly-sweet-reason/

Not Exactly Sweet Reason

July 30, 2010 by

One of the United States’ most blatant examples of protectionism — so blatant that it is used as an illustration of the idea in some economics textbooks — is its sugar policy. FULL ARTICLE by Gary Galles

{ 16 comments }

J. Murray July 30, 2010 at 8:57 am

Funny, the sugar going into Canada at $0.19/lb isn’t filled with metal shavings and burlap sacks. And the fact that candy manufacturers don’t manufacture in America anymore is telling that the price of candy doesn’t have anything to do with the matter. The reason sugar is only half the cost of a candy bar is becuase they make the candy bar elsewhere. Domestic American sugar prices don’t have any impact. Life Savers moved out of America to Canada purely over the sugar prices. Canada isn’t some third world nation. The sugar industry is really grasping at straws here.

Michael A. Clem July 30, 2010 at 9:36 am

The sad truth is that so few people even know about U.S. sugar policy, much less care about it. Most people don’t realize the consequences that such a policy has, which is far-reaching, considering that most processed foods contain sugar, not just candy bars. It’s also part of the reason soft drinks primarily use high fructose corn syrup instead of cane sugar in their drinks. If the U.S. sugar industry needs protection from competition, then maybe it shouldn’t exist. Dependence on foreign sugar would be no different than dependence on other foreign goods. International trade is a beneficial thing, not some kind of competition or war.

Curt Howland July 30, 2010 at 9:41 am

“International trade is a beneficial thing, not some kind of competition or war.”

What? That’s not what I hear on CNN!

Russ July 30, 2010 at 9:56 am

“International trade is a beneficial thing, not some kind of competition or war.”

Well, it may not be war, but of course it’s competition! Businesses compete, absent a monopoly, and that doesn’t matter on whether they are located in the same country or not.

As for the “International trade is a beneficial thing” part…. Well, in the long term and big picture, yes. In the short term and locally, it’s probably not so subjectively beneficial to the US worker who gets laid off because of cheap-labor competition from another country. This is what libertarians always seem to ignore. (Lefties are the exact opposite, and only pay attention to the short term pain, always ignoring the long term benefits.) Do libertarians never get laid off, or are we all such paragons of virtue that we don’t care about our own short-term well-being?

mpolzkill July 30, 2010 at 10:36 am

We all swam miles and miles out into the interventionist ocean, most of us going are to drown, it’s really simple and incontrovertible.

J. Murray July 30, 2010 at 10:40 am

Yes, libertarians do get laid off. But, unlike the followers of other political philosophies, we don’t complain about it and instead use the energy on finding new work. Libertarians, surprisingly, don’t find themselves out of work for very long.

anarchist July 31, 2010 at 12:45 am

i think the massive volatility in paper-money exchange rates is as much to blame for offshoring as comparative advantage.

Ohhh Henry July 30, 2010 at 10:08 am

Well, in the long term and big picture, yes. In the short term and locally, it’s probably not so subjectively beneficial to the US worker who gets laid off because of cheap-labor competition from another country. This is what libertarians always seem to ignore.

Your characterization of libertarians is laughable. You should read more, starting with Adam Smith and Bastiat and working your way up to Mises, Rothbard, Hoppe, et al.

If someone was wearing shoes that were too tight and hurting their feet, would you try to prevent them from changing their shoes out of concern that they would be (briefly) shoeless?

André July 30, 2010 at 10:13 am

As Peter Griffin would say after reading this article – “Sweet!”. Very interesting indeed.

Trade barriers, from the beginning, are perfect incubators for monopolies – it’s just logical that they are going to grant higher prices and lower quality, as it always happens when somebody finds a way to distort prices, in order to help a special interest group.

It is also quite clear that there is always some politic reason behind a trade barrier. Since groups of privileged men enjoyed political power, trades have been a great source of taxation – so why to limit the flood with a barrier? – it sounds just masochistic. Maybe “those in charge” do not want to finance other nations which will have to be bombed in a couple of years, or maybe it’s just a matter of really generous lobbying and political friendships. In both cases, we are just talking about a indirect form of consumer taxation. So, it’s quite puzzling to hear someone saying that existing trade barriers saved taxpayers money.

Also, if these protectionist policies are so good – as the guy said – why don’t we apply them to every piece of merchandise produced within the national boundaries. It would be particularly interesting to see how the thing would work out with oil and fuels in general. Every time you go to the gas station there’s a different price – how come someone do not intervene to stop this roller-coaster? Let’s flatten oil prices a bit with some nasty trade barrier! And why to stop with oil? Let’s just put trade barriers on everything that comes from abroad – except genuinely exotic stuff, which does not harm our honest domestic producers. Metals, food, energy, services – every foreign item must be priced a bit more than its national version. Ain’t that a bliss?

It’s quite reasonable to expect that such a scenario would be catastrophic for everybody – a great amount of wealth would be destroyed in the process, causing economy to enter into a phase of prolonged depression and finally stabilize in a far more dwarfed shape. Ah – and of course, black market would flourish. But that’s another story.

JFF July 30, 2010 at 11:39 am

You know who actually taught me about this? None other than Ron Paul during the 2008 Presidential race. I think someone asked him, as a doctor, to comment on the use of high fructose corn syrup in foods made and consumed in the United States and he said, “well, that’s because we have a protectionist policy with regard to sugar.”

wastate August 1, 2010 at 10:03 am

And a very strong agriculture lobby trying to find ways to use up all the subsidized corn we (Taxpayers) pay Big-Agriculture (ADM, Conagra, etc) to produce a product we don’t need any more of.

IMHO August 1, 2010 at 12:41 pm

Here’s an interesting article from a diabetes website on the impact of high fructose corn syrup on your body. It’s one of the reasons why I prefer to use products with real sugar.

http://www.diabeteshealth.com/read/2008/08/20/4274/the-dangers-of-high-fructose-corn-syrup/

At any rate, now that some companies are making ethanol from sugar cane, does that mean that in addition to the protectionism, they are also getting subsidies from the government for making the ethanol?

Johnny Protectionist August 2, 2010 at 8:40 am

The 800 pound Gorilla that this article fails to address, is that the Protectionist policy is actually a result of other interventions into the free market. Any domestic industry that produces goods is required to comply with a myriad of oppressive taxes and regulations. Foreign producers often do not have to comply with such regulations, and in many nations, are also heavily subsidized. This allows foreign companies to produce at very, very low cost. This means, that as a result of our own interventionist policy, we make it impossible for competition to occur on a level playing field. Essentially, if we lifted the quotas and allowed free competition without changing anything else, our own requirements and regulations would make it impossible for domestic industry to compete and would literally drive our own producers out of business. Sadly, the protectionist policy is needed to offset the damage done by our other interventions. Until you abolish the former, you cannot abolish the latter.

Now, I already realize that the consumer would get cheaper sugar regardless of what happens to domestic production, but we must keep in mind that those businesses also contribute to the economic well being of society. They use an endless array of resources to operate, this fuels other industries (energy, refinery equipment, computers, component manufacturers etc…) and, in addition, we cannot forget all the employees who work at these domestic industries. If the industries fail, all the employees lose their jobs. That means they will not be spending that lost income in their communities until they get a new job. This causes damage for a period of time.

All of this goes back to my original point, which bears repeating. One intervention is causing the other. Therefore, we can avoid ALL the negative consequences, and have both the benefits of a health domestic industry, and a robust free-trade competion with foreigners if we JUST GET ALL THOSE DISTORTING GOVERNMENT REGULATIONS OUT OF THE WAY!

Nick Bradley August 2, 2010 at 9:06 am

Yes, taxes and regulation drive prices up. But to say that foreign producers are immune to the same (or worse) policies is absurd. Regulations and taxes in Europe and the third world are much worse than ours.

Christopher Jones August 2, 2010 at 9:51 am

Another great article!!! I was a little surprised that the author did not make mention of the corn syrup issue, most likely due to the fact that a daily article on the mises blog does not permit one enough space to elaborate on the backwardness of government intervention (in fact one could fill several tomes with these elaborations). But the irony that corn syrup, used as a cheaper sweetener b/c corn is subsidized by the govt. and the plethora of interventionism and trade barriers to sugar mentioned in this article keep the price of sugar higher than its equilibrium on the free-market, provided a huge incentive for soft drink and candy companies to use corn-syrup sweeteners in lieu of sugar. And now the nanny state in all its infinite wisdom wants to tax the corn-syrup as a moral hazard that turns our kids and adults into morbidly obese wards of the state. The irony here (although with govt. intervention unintended consequences like this are the norm so although it may not be ironic to me and readers of this blog, the general populous might not see it through our Austrian lens) is almost too good not to have included in the article on sugar!!!

Richard in Paris November 4, 2010 at 3:30 am

I am not too sure of the exact details but here in France farmers are still holding back corn stocks to force up prices, even with the huge handouts given by the EU. The open market has been manipulated for years. Great article

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