The Trump administration has managed to upset people on both sides of the ideological divide with wrong turns on both trade policy and environmental policy.
It can right the ship on both fronts by showing the boldness to pare back misguided sugar policy that distorts trade, places burdens on taxpayers and consumers, and contributes to deterioration of the Everglades.
In January, President Trump delivered a one-two punch to our trade relations and the environment when he invoked a rarely used trade statute to impose heavy tariffs on imported solar products. The tariffs are designed to protect two bankrupt domestic solar companies.
The decision will put upward pressure on solar prices in the United States, which will lead to a decrease in solar deployment and further dependence on fossil fuels to meet energy demands. The measure is being challenged domestically and by our trading partners at the World Trade Organization.
Suffice it to say, it was not a shining moment for either trade or environmental policy in the United States.
Like the bankrupt companies at the center of the fight over solar tariffs, the domestic sugar industry has a sordid history of begging for handouts at the government trough.
As Dartmouth University economics professor Douglas Irwin notes in his new book, “Clashing Over Commerce: A History of U.S. Trade Policy,” sugar producers have long sought to bend public policy in their favor by discouraging foreign competition.
The domestic sugar industry first received trade protection with the passage of the Tariff Act of 1789, though the goal was to raise revenue for the fledgling federal government. In 1842, the tariffs were expanded with the explicit goal of protecting domestic industries, including sugar producers that were then primarily in Louisiana.
Though the forms and rates of protection have changed over the years, the substance has not. Today, imported sugar faces a tariff rate quota, or TRQ. The TRQ essentially limits the amount of sugar imported into the United States, with quotas set by the Office of the U.S. Trade Representative and distributed among 40 sugar exporting countries.
Imports in a quantity below the yearly quota enjoy low tariffs (0.625 cents per pound), while sugar above the quota faces a tariff of about 15 cents per pound.
The TRQ effectively caps the amount of imported sugar that domestic consumers buy and, in conjunction with other domestic subsidies, pushes the price of sugar in the United States to about twice that of the rest of the world.
This is a good deal for domestic sugar producers, but a raw deal for sugar consumers — individual families, bakeries and confectioners.
But the effects of sugar protectionism are more than just a benign albeit unsavory tale of higher prices for consumers padding the bottom line of the domestic sugar industry.
As Irwin notes in his book, in the 1980s, “The sugar quotas also led farmers in the [Caribbean and Central American regions] to stop producing sugar and start cultivating illegal narcotics that were smuggled into the United States, starting a war with drug traffickers.”
Likewise, as Floridians are well aware, the environmental degradation of the Everglades from domestic sugar production has been substantial. Specifically, phosphorous used in fertilizers for sugar cane production has wreaked havoc on the Everglades.
A substantial majority of phosphorous that ends up in the Everglades comes from sugar cane farms. Canals that divert phosphorous away from the Everglades instead end up contributing to massive toxic algae blooms that kill wildlife and force public beaches to close.
The reality is that neither Florida nor Louisiana is ideal for sugar cane production, and even the application of phosphorous and nitrogen-rich fertilizers doesn’t allow for production as efficient as elsewhere in the world.
Taxpayers are paying enormous subsidies and consumers are paying excessive prices, all so that we prop up an industry that damages the environment.
With the farm bill up for reauthorization this year, now is the time for Congress to re-examine the outdated sugar program. For too long, policymakers have looked the other way as domestic sugar support programs have damaged trade relations, harmed the environment and consumers.
If the Trump administration is serious about its pledge to drain the metaphorical swamp in Washington, they could start by acting to preserve the real swamp in Florida.
Image credit: Steven Frame