2008 Farm bill. SUGAR POLICY IN THE US: SUBSIDIES AND QUOTAS Presented By: Ali Alhosani & Joshua Annas. OVERVIEW. On June 19th, 2008, Congress enacted the complete Food, Conservation and Energy Act of 2008 (i.e. 2008 Farm Bill)
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SUGAR POLICY IN THE US: SUBSIDIES AND QUOTAS
Ali Alhosani & Joshua Annas
FOUR BASIC COMPONENTS OF THE FEDERAL SUGAR
Doha Agreement would bring new commitments:
Commodities – 11%
Other – 12%
Other – 15%
Commodities – 23%
Conservation – 8%
Nutrition – 68%
Nutrition – 62%
Sugar policy distorts relationship between supply and demand by setting an artificially high domestic price of sugar through price floors and Tariff Rate Quotas (TRQs). As seen on next slide.
Domestic consumers are hurt through increased prices for sugar and foods which rely on sugar as an ingredient.
IS U.S. SUGAR POLICY SHORT SIGHTED?
A STUDY BY THE CENTER FOR TRADE POLICY STUDIES CONCLUDED THAT:
“By undermining America’s broader agenda of trade expansion, sugar quotas have reduced the chance of successfully negotiating bilateral agreements with trading partners such as Australia, or an FTAA, or a new agreement with other members of the WTO. Unilaterally dismantling our sugar program protections would put the United States in a much more powerful position to advance the free-trade agenda that has served our economic interests so well” (CTPS).
Impasse reached as U.S. seeks elimination of agricultural export subsidies, an easing of tariffs and quotas, and reductions in trade-distorting domestic support, while unwilling or unable to abolish its own; of which domestic sugar protection through subsidies and quotas plays a large part.
Developing countries, meanwhile, argue that “their own producers cannot compete against surplus agricultural goods that the developed countries, principally the EU and the United States,…[are selling at] subsidized prices” (CRS Report).
Congress should match US free trade rhetoric with substantive policy.
Given strength of the US sugar lobby, this will not be easy.
Will require coalition of all those negatively impacted by current policy to lobby in aggregate for change.
The next farm bill, or an amendment to the current farm bill, should include provisions to gradually eliminate the outdated and protectionist subsidies and quotas for the domestic sugar industry.
Gradual removal over a period of years would be fair middle ground and would allow domestic sugar producers to reform their production to become more efficient to compete in the global market. Those who could not produce more efficiently and reduce costs would be forced to leave industry, this would create the loss of some jobs but should, in economic theory, increase total net societal welfare and increase jobs in other sectors of the economy.