U.S. tariffs on sugar drive up costs for American manufacturers and consumers

U.S. tariffs on sugar drive up costs for American manufacturers and consumers

High tariffs in the U.S. raise the price of sugar, driving food manufacturers such as Mondelez International out of the country.

Six manufacturers fled Illinois in July, and another business did so in August.

One of the companies that left the state was Mondelez International, maker of Oreo Cookies. In May, WGN noted:

“Chicago is competing with Mexico to land a plant that makes Oreos and Chips Ahoy cookies. Mondelez International plans to invest $130 million to put up four new manufacturing lines that would make Nabisco cookies and crackers. The company is starting talks with its labor unions here in Chicago and says it will base its decision on a variety of factors. The company’s plant at 73rd and Kedzie has more than 1,000 union members.”

Dealing with Illinois’ business climate is bad. Mondelez International’s decision to leave Chicago was sound enough on that basis alone.

There is another aspect of the deal that has not been discussed much, though: sugar tariffs.

How the cookie crumbles

The Daily Signal’s Bryan Riley wrote on Aug. 18:

“The manufacturer of Oreo cookies recently announced plans to move production of Oreos from Chicago to Mexico, resulting in a loss of 600 U.S. jobs. This should be a wake-up call to defenders of the U.S. sugar program and other job-destroying trade barriers. The leading ingredient in Oreos is sugar, and U.S. trade barriers currently require Americans to pay twice the average world prices for sugar. Sugar-using industries now have a big incentive to relocate from the United States to countries where access to their primary ingredient is not restricted. If the government wants people making Oreo cookies and similar products to keep their jobs, a logical starting point would be to eliminate the U.S. sugar program, including barriers to imported sugar. This obvious connection between the lost jobs and sugar quotas was missed by many observers. According to one online commenter: ‘This is why tariff[s] on products coming to U.S must be raised.’ …

According to a 2006 report from the government’s International Trade Administration: ‘Chicago, one of the largest U.S. cities for confectionery manufacturing, has lost nearly one-third of its SCP manufacturing jobs over the last 13 years. These losses are attributed, in part, to high U.S. sugar prices.’ … For example, The Bakery, Confectionery, Tobacco Workers and Grain Millers Union consistently has opposed free trade agreements with sugar-producing countries like Australia, Brazil, and Mexico—the kind of trade deals that just might protect their members’ jobs.”

Sweet deals

Tariffs cost jobs – raising tariffs would only make matters worse.

Such sweet deals preserve a few jobs (in the case of overly expensive sugar production that is really far better suited to the tropics), at the huge expense of any manufacturer in the U.S. that needs sugar.

On net, sugar tariffs have cost the U.S. countless jobs.

And among other things, the sweet deal Obama worked out in the Trans-Pacific Partnership, or TPP, protects sugar.

A true free-trade agreement

To call the TPP a “free-trade” agreement is ridiculous.

A true free-trade agreement would consist of precisely one line of text: “All tariffs and all government subsidies on all goods and services will be eliminated immediately.

Sugar vs. sugar

Unlike oil, where there are differences between grades, sugar is pretty much sugar. But there are two commodity futures prices for sugar. Sugar No. 11 (the global price), and sugar No. 16, the U.S. price, thanks to tariffs.

  • Sugar No. 11: $10.44
  • Sugar No. 16: $24.50

In the U.S., sugar costs 135 percent more than in other countries.

High-fructose corn syrup

For icing on the cake, note that sugar tariffs and corn subsidies are behind the use of high-fructose corn syrup instead of sugar in U.S.-manufactured candy, cookies and crackers.

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