Consumer Cost for Sugar Price Props High, U.S. Says

From Reuters

A U.S. government program to support American sugar prices is costing consumers $3 billion a year, foreign sugar exporters $800 million or more, and U.S. and foreign sugar workers tens of thousands of jobs, the Commerce Department said Thursday.

“In the United States, the situation in terms of operation of the sugar program has deteriorated,” the department said in a new report on the program.

The object of the sugar program is to keep U.S. prices stable at 18 cents a pound, relying on an import quota to insulate the American market from world prices, which are a lot cheaper at 8 to 9 cents a pound.


Opponents of the sugar program said the report could win them new backing for reducing price supports.

But program backers, including House Agriculture Committee Chairman Kika de la Garza, a Texas Democrat, have vowed to refute the report.

The report, completed in April, estimates that U.S. sugar prices would fall and world prices rise to about 11 cents a pound if the program were abolished. The difference between that price and the current U.S. price costs consumers about $3.2 billion each year, the report said.

Sugar program advocates have said sugar is such a small expense in most components in which it is used, such as candy bars and soft drinks, that consumers would not pay less even if the sugar price were reduced.

But the Commerce Department said it has established a statistical relationship between sugar prices and prices of sugar-containing products. Therefore, consumers would notice a reduction in the sugar price.

The sugar program also hurts foreign exporters of sugar by reducing access to U.S. markets, the report said. Quotas have declined as U.S. sweetener production increases under the price protections, and exporters have seen their earnings drop from $1.1 billion in 1982 to $288 million in 1987.

The declining export earnings in turn undermine other aid granted by the United States to economically struggling allies, such as the Philippines and Caribbean nations, who rely on sugar exports, the Commerce Department said.

In both the United States and abroad, sugar refiners have been closing plants and laying off workers. The report estimated job losses at 12,000 in the United States and more than 100,000 in the Caribbean and Philippines.

Although the report focused on U.S. sugar policy, it said world sugar trade in general has been distorted by widespread subsidizing, particularly in the European Community. Some level of price supports is needed to protect U.S. farmers from such distortions, the report concluded.

Citing such problems said to be caused by the sugar program, the Reagan Administration has long sought to scale back the program. The Administration recently announced it would support a proposal by New Jersey Democratic Sen. Bill Bradley to cut sugar price supports to 12 cents a pound.

The report already has gained Congressional supporters, said Tom Hammer, a lobbyist for the Sweetener Users Assn., which opposes the current program. Hammer said he thinks the Bradley bill has a good chance of passing by next year.

But de la Garza said he thinks the sugar program has enough supporters in Congress to defeat attempts to scale it back. “All the attacks can be answered with legitimate and logical replies,” de la Garza said.

Sugar lobbyist Luther Markwart said program supporters, who already have responded to the report with a flurry of press releases condemning it, were going to conduct a study of their own aimed at demonstrating the benefits of the price support program.

“The whole purpose of the (sugar) program is to stabilize prices and maintain a viable industry,” he said.