SUGAR DADDY::

Sugar Land: Obama's slow roll on free trade. (WSJ, 8/22/09)

Mark it as an early retreat by the Obama Administration to a small group of domestic producers who wield an outsized political influence in the fight against trade liberalization. In states from Florida to Minnesota, sugar producers have their profits guaranteed by a price floor created by the import restrictions. Anyone who doubts their influence in Washington need only review the battle over the Central American Free Trade Agreement, which the sugar growers nearly throttled over the prospect of a 1% increase in annual import quotas.

Each year, the amount of foreign sugar that manufacturers may use is limited to protect U.S. sugar farmers who benefit from artificially higher prices on the domestic market. According to the letter to Secretary Vilsack, signed by companies like Kraft, Hershey and Mars, without some easing "consumers will pay higher prices [and] food manufacturing jobs will be at risk." But scarcity is only half the issue. The other half is a protectionist program that distorts trade and has negative economic consequences.

The costs have been a sticky issue for years. According to a 2006 study by the U.S. International Trade Administration, each sugar job saved by propping up domestic producers costs three jobs in manufacturing, with many companies relocating to countries such as Canada and Mexico where the price of sugar can be one-half to two-thirds the rate in the U.S. So instead of importing sugar, the U.S. brings in more sugary finished products, with imports rising to $18.7 billion in 2004 from $6.7 billion in 1990.

The Administration's reluctance to take on the sugar lobby comes in the context of what is beginning to look like a slow roll by the President on free-trade principles.