American consumers are the most fortunate people in the world. The U.S. market economy provides them with a wide choice of goods and service at reasonable prices.
In a pure market economy both the structure and the consumers and producers are driven by market forces. No country maintains such a pure market. The U.S. market, as free as it is, has plenty of regulation. The government interference is often for good reasons, like preserving health and safety. Sometimes the regulation is more questionable. Sometimes it is imposed to provide preferences for certain favored groups. This kind of regulation allows the government to distort market forces, causing higher prices and less choices for consumers.
Sugar is an interesting case of protection of a special producer group in the U.S. market at the expense of consumers. The regulation takes the form of restrictive quotas on the import of sugar. The result is that the American consumer has been obliged to pay about three times the world market price for sugar, a commodity which is an important part of many of the foods we eat every day.
Our national sugar policy embodied in our tariff rate quota system already costs U.S. consumers dearly. However, some imported products, containing sugar, are not now subject to these quotas.
Sugar producers are now attempting to amend trade laws so that these products, too, could be declared as “circumventing” quota laws. Products so designated would then be subject to the quotas. These imports are only a small proportion of total consumption, but the probability of higher prices is not a happy prospect for the American consumer.
An amendment introduced by Sen. John Breaux (D-La.) has already been approved as a part of a Trade Adjustment Assistance Amendment to the Trade Promotion Authority bill in the Senate Finance Committee. The Breaux amendment was offered as a means of controlling an obvious circumvention, which had been already stopped by court action, but it could extend to a long list of food products.
The Breaux amendment requires the secretary of agriculture to report regularly to the president on products believed to be circumventing quotas. If the secretary identifies such products, the president would be required to proclaim them subject to quota (and therefore higher in price).
It is an interesting, and very clever, tactic to have the agriculture secretary, whose responsibility it is to promote the domestic sugar industry, make a trade decision placing force on the president. First, the secretary would be given the tariff jurisdiction now in the hands of the secretary of the treasury. Then she could force the president to do something he may not wish to do.
In addition to imposing higher prices on consumers and distorting the structures of the executive branch of government, the operation of the Breaux amendment is likely to violate U.S. trade agreements. Moving products not under quota into a quota restriction would certainly cause disputes and, eventually, retaliation.
If the United States found its trading partners denying its products access which the partners were bound under treaties to allow, it would surely dispute and retaliate. Our partners will certainly do the same thing to us. Our largest trading partners, Canada and Mexico, have already indicated their displeasure.
There are many good reasons why the Breaux amendment should not become law: (1) consumers don’t need extra costs now; (2) the executive branch does not need reorganization to create a “Sugar Czar”; and (3) the United States should not pick a fight with its best customers just as it is trying to promote a new round of negotiations to boost trade.
Former Rep. William Frenzel (R-Minn.), who served in Congress from 1971 to 1989, is a senior fellow at the Brookings Institution.