If you gave up sweets for Lent, your timing is impeccable, because candy may be more expensive this month than ever.
The cause is a pointless trade dispute with Mexico rooted in indefensible American protectionism.
Mexico’s sugar industry announced this week that it suspended exports into the U.S. This comes when the price of American sugar is at its highest in nearly five years, and is 50 percent higher than the world market price. The proximate cause is a bureaucratic scuffle within a wider trade dispute dating back to 2014.
But the root cause is Washington’s absurd sugar policy, which is a corporate welfare program for domestic cane growers and beet farmers. The main subsidy for sugar growers comes in the form of import quotas. Brazilians, Mexicans and Dominicans want to sell us more sugar, and food makers want to buy more too, but the Department of Agriculture won’t let it happen.
Curbing supply drives up the price of sugar, subsidizing beet growers in Minnesota and the cane growers in Florida. In the real world, a pound of raw sugar costs $20.40. In America, it’s $30.59.
The sugar producers’ gain is the sugar users’ loss. Candy makers and food manufacturers pay more. This drives up the price we all pay for peanut butter at the checkout aisle. Consumers, forced to buy either overpriced sugar or its almost-as-costly substitute, high-fructose corn syrup, are obliged to spend $2.4 billion a year more than necessary to finance this boondoggle.
That’s how protectionism works. A politically favored industry profits — the sugar barons’ political connections are legendary — while the rest of us pay the tab.
But the costs go much further.
Late last decade, Hershey moved 1,500 jobs to Monterrey, Mexico, closing or shrinking plants in San Francisco and Reading, Pa. Brach’s caramels are now made in Mexico. So are Red Hots and Jawbreakers. Those jobs might all still be in America if not for protectionism.
So we increasingly buy our candy from Mexico, but we’re banned from buying sugar from Mexico this month. Mexico has canceled permits to export sugar to America because it has already hit its six-month quota. Between now and April 1, when Mexican sugar will be allowed across the border again, domestic prices of raw sugar will probably climb, and the needless pain could trickle downstream, hurting candy makers and consumers even more.
Mexican authorities blame the halt on incompetence at the Department of Commerce. This should prompt Commerce Secretary Wilbur Ross to get his department fully manned.
There’s a more important lesson in this mess for Ross, though. He is a dedicated protectionist, having built his fortune partly by betting on beleaguered industries, such as steel, that profited through federal protection. He has advocated for policies similar to the sugar program that protect domestic producers from foreign competition.
Most imports are like raw sugar, intermediate goods rather than consumer goods. That is, most of the goods that enter this country are inputs and are used in manufacturing. Making them more expensive through tariffs or quotas, raises the cost of running a factory here. That costs jobs.
Central planners who think they are smarter than the market are proved wrong again and again. They don’t create wealth but redistribute it, often from the less politically connected to the more connected, and from the more efficient to the less efficient. As Mexican sugar demonstrates, when governments interfere with markets in goods and services, bureaucrats gum up the system.
This bitter sugar flap and layoffs by candy makers ought to be a lesson to Ross and President Trump that protectionism is not sweet.
