September 10, 2003
THE PERMANENCE OF PROTECTION:
Brazilians Soured by U.S. Sugar Tariffs (Jon Jeter, September 10, 2003, Washington Post)
This is harvest season in Brazil's sweet spot, the red-earthed prairie in the southeastern corner of the country that produces more sugar than practically any place on earth. But little of the sugar grown here appears on American shelves or kitchen tables, a glaring example of the protectionist measures adopted by wealthy countries to shelter their industries from poor countries' abundant farm exports.While Brazil has both plentiful and fertile land and available workers, the 244 percent tariff that the U.S. government levies on sugar imports above established quotas prevents the Latin American nation from dramatically expanding its sugar industry and potentially dominating the American market. So scarce are jobs here that when a supermarket in Sao Paulo last week ran a newspaper advertisement for a new cashier, more than 3,000 people showed up the next day to apply.
"Brazil could easily double its sugar production almost overnight," said Maurilio Biagi Filho, president of the Companhia Energetica Santa Elisa, a sugar mill here that employs 5,000 workers. We certainly would have no problem finding workers if the U.S. lifted its tariff on our sugar today," he added, exaggerating to make his point. "There is no reason we couldn't supply Americans with all the sugar they need by noon tomorrow."
While business and government officials in the United States, Japan and the European Union proselytize about the benefits of unrestricted trade in coaxing developing countries to open their markets to foreign goods, they continue to use tariffs, export subsidies and health regulations to block imports in the one industry in which countries from the poorer southern hemisphere can compete: agriculture.
The chasm between rhetoric and reality in wealthy countries is likely to be the most contentious point between rich and poor nations at the World Trade Organization's meeting that opens today in Cancun, Mexico.
Flies in the Sugar Bowl (Paul L. Poirot, May 1956, Ideas on Liberty)
If anyone seeks an example of the utter and total failure of government intervention as a substitute for the free-market method of satisfying human wants, let him study the sugar situation in the United States.In strict confidence, many an American farmer will tell you he doesn't really believe in all these government farm support programs; he'd rather stand on his own two feet and compete in a free market. But then he'll go on to explain that one of the big reasons why he has to have some government aid is because nonagricultural businesses enjoy tariff protection. And a great many American voters act as if they see logic and justice in such a claim.
But an American grower of sugar cane or sugar beets can't very well use such an argument, for he farms behind a substantial wall of tariff protection, or what amounts to the same thing in the form of quota restrictions against imports of sugar.
It's quite an ancient wall that protects domestic producers of sugar-about as old as the United States. When this nation was young, the wall was primarily a mechanism for collecting revenue on sugar as on many other imported items.
In those days, maple trees provided much of the domestically produced sugar, accounting for up to 40 million pounds a year as recently as a century ago. Thereafter, competition from cane and beet sugar plus more favorable employment opportunities elsewhere, gradually took the joy out of the "sugar bush" business until it has virtually disappeared.
Hey, if we're going to have a bogus handout--and, let's face it, we are going to--we want it given to New England maple sugarers again. Posted by Orrin Judd at September 10, 2003 7:17 PM
If maple sugar is in oversupply, why does it cost so much?
Sugar was the commodity that first made me realize that conventional economics is all wrong, although I had caught a glimpse with beer somewhat earlier.
Anyhow, sugar is fungible and most of the cane sugar is slave-grown still. So unless you want to go back to 19th century conditions -- fine with Orrin, perhaps -- you might want to think about that.
Neither of these snippets here betrays even the slightest understanding of sugar. The problem is not US tariffs but European subsidies.
Though I cannot prove it, I've been watching it for a long time, and I'm convinced that the European subsidies are based on the memories of little boys who missed out on candy and cakes during the war and are not going to let that happen again.
Anyhow, the historical fact is, that when sugar is free in the US, consumers complain mightily.
Anoeher fact is that sugar is, tariffs and all, the cheapest food.
Posted by: Harry Eagar at September 10, 2003 9:32 PMGlobalization and free trade means folks who'll work cheaper will allow their bosses to make stuff cheaper. Why do we have a sugar industry if the Brazilians will sell it cheaper than we can make it?
Posted by: oj at September 10, 2003 9:38 PMWhat the heck does any of that mean, Harry? You agree, I assume, that US sugar prices are above world market prices? That world sugar is not allowed into the US? That sugar producers are, by and large, rich men on welfare? That through taxes and artificially high pricing, these rich men are subsidized by people who are much poorer, both in the US and abroad? That the result is distortion of both the US and world markets, with land being used for sugar in the US that would, in a free trade world, be used for other things? That Coke made with cane sugar is better than Coke made with corn syrup? That confectionary companies are moving out of the US -- again, to the detriment of people worth much less than the sugar producers -- because of the domestic price of sugar?
Posted by: David Cohen at September 10, 2003 9:43 PMNo, I don't agree with any of that.
World sugar prices are not based on anything economic, just on tax policies.
US producers can make sugar cheaper than anybody, but they can't make it cheaper than the dumped price.
I understand that you and Orrin and the professor, on items like sugar, pharmaceuticals etc., think it's a good strategy to let other taxpayers subsidize us.
That is, at best, a temporary strategy.
And food and medicine are not cars or computers. As that great economist, Harry Hopkins, said: "People don't eat in the long run. They eat every day."
Posted by: Harry Eagar at September 10, 2003 10:02 PMNothing is based on anything economic, it's all based on state interventions--that's the point. Reduce the state role and let economic laws function. If, in the meantime, the French, Brazilians, etc., want to be our coolies, I'm down with that.
Posted by: oj at September 10, 2003 10:06 PMHarry, I rather doubt that American producers can grow sugarcane for anywhere near the price that the Brazilians can. I have travelled in the major Brazilian cane growing region, the farms are huge, the soils are excellent (by tropical standards), and the farmers are no more afraid of adopting new technologies than their American counterparts. Slave labour is not their competitive advantage (that takes place on the cattle ranches further to the west).
I was there to look for diseases in forest an fruit plantations, and was amazed by the productivity of some of the operations I visited. The forestry plantations in particular were using modern cloning techniques and the latest harvesting and forwarding equipment from scandinavia. They were harvesting eucalyptus on a 7-8 year rotation. The best loblolly pine stands in Alabama harvest on a 25-30 year rotation - and we had a 40 year head start in applying modern management and tree breeding.
Don't underestimate the advantage the Brazilians have just because of their latitude.
Posted by: Jason Johnson at September 11, 2003 10:20 AMI don't underestimate them. When your Hawaii sugar growers moved into coffee, they did a bad job and had to call in the Brazilians for help.
Sugar is like money, fungible. So you have to look at the whole world. It's grown in over 100 countries.
No question, though, Hawaii prodocers are the most efficient. But the so-called world price runs 60 to 80% under even Hawaii costs of production.
If there's anything I've learned about business, it's that buying at the lowest price instead of making it yourself is not always -- maybe not even usually -- a good idea.
The most obvious example -- although few people seem to get it -- is buying cheap pharmaceuticals from Canada.
Along with that, you buy the future of the innovative Canadian pharmaceutical industry. Who would want that at any price?
Not me.
A friend of mine whose research speciality is small farmers in the tropics uses the watchword, "Low input means low output."
A good thing to keep in mind.
Posted by: Harry Eagar at September 11, 2003 2:28 PMHarry:
The Canadians don't make any drugs. They buy ours and then sell them back cheaper than we can get them. If the pharma companies just start cranking the prices they charge Canada we'll make out like bandits on both ends.
Your argument makes some sense for steel, which we may need for weapons, but it's hard to believe that there's a need for us to be the 100th sugar producer.
That's because you are too young to remember what happened the last time sugar was freed in the US.
That was the very first business story I ever covered, and in the 30 years aince, I have never encountered the pain and anger that I did over sugar. Not over gas, or electricity, or interest rates.
The need for additional rsearch in sugar is low, but the need for additional development of drugs is extremely high.
You pay for that now through high prices for drugs.
There are two alternatives. One is to let government pay for the research. The other is to not see the research done.
That last is what the acceptance of drugs from Canada amounts to.
Posted by: Harry Eagar at September 11, 2003 7:10 PMWe've got more than enough pharmaceuticals.
Posted by: oj at September 11, 2003 7:22 PMI suggested a while back that you ask your wife about that. Obviously, you didn't.
Posted by: Harry Eagar at September 12, 2003 2:40 PMYou kidding? There'
s not an honest doctor in America who won't tell you that patients are prescribed too much medicine, that costs too much, to treat diseases caused by their own behavior, that merely extend the dying process, etc.. Each of us eventually has an obligation to die--modern medicine seeks to deny that at great cost to society and little benefit to the patient.
I enjoy at least 5 inherited diseases, one of which is going to kill me sooner or later.
One of them would have gotten me 24 years ago if it weren't for modern drugs.
I don't think of that as a little benefit.
Posted by: Harry Eagar at September 12, 2003 9:26 PMNo, but we Darwinists consider it to be a problem for the gene pool.
Posted by: oj at September 12, 2003 9:38 PM