Sugar in America, or What can go wrong when you legislate localism.

Last week the difference between what America and the rest of the world pays for cane sugar hit a ten year high. America pays almost forty cents per pound. The rest of the world pays less than twenty cents.

The reason is America protects its ten thousand local cane sugar producers with legislated import restrictions. We can't buy the sugar that the rest of the world does. It's an old system, one we've had in one form or another since 1816. And, with such a long history, it's a textbook issue of how things can go strangely, bizarrely wrong when you legislate localism.

One bizarre effect has been on corn. Faced with high cane sugar prices engineers went to work to figure out how to reduce other foods to sugar. They found corn. It converts to sugar relatively easily, turning into corn syrup and high fructose corn syrup. However, it was still more expensive to harvest and convert it than to buy cane sugar.

Lucky us. Corn is subsidized by taxes. The subsidies lower the cost of corn by so much it makes business sense to replace cane sugar with corn syrup. Corn, it's useful to note, is usually grown with chemical fertilizers.

Now, in a bizarre turn of events, corn growers love high sugar prices, too. They support the import restrictions because it means there's more demand for corn.

The thing is, there's no need for us to be growing sugar cane.  It could even be bad for us to do so. There are very few places in America where the environment is suited to it. Ecologically speaking, it doesn't make much sense to grow something in an inhospitable environment. As James McWilliams wrote in his book Just Food, "An environmentally sound food system is one in which productive endeavors naturally gravitate to geographical locations where the impact on resources is minimized. In other words, producers prodce in the right places."

The Caribbean and Africa, however, are perfect environments to grow sugar cane.  That's  the right place to produce it. In fact they grow tons of it. They sell it to everyone else in the world. Except us. It's worth noting much of it is organic because poor farmers usually can't afford fertilizer.

So here's the final bizarre effect. Most of the places in the Caribbean and Africa that grow sugar cane are impoverished. They would love to do business with us and sell their natural, ecologically sound product. We don't let them. What we do instead is refuse their sugar but give them a significant amount of humanitarian and economic aid.

When you follow up these bizarre turns it may hurt your head. First we prohibit poor nations from selling us sugar. Then we use our taxes to subsidize corn growers for a substitute. Then we use more taxes to send aid to the poor nations.

How much more effective would it be to just let us do business with Africa directly, to not give handouts?

I wrote a previous post on sugar here.