By Stephen Moore and Phil Kerpen
If American consumers and taxpayers have learned any lesson over the past number of years it’s that sugar producers don’t like competition. In fact, they loathe it. Always have. Since 1820, when Louisiana sugar planters successfully argued for high tariffs to prevent a collapse in the value of slaves, the industry has used political influence to fleece consumers and taxpayers and avoid competition. In the last two centuries, no other industry has better used its deep pockets and political clout to restrain trade and competition.
American consumers have been victimized by this racket. In 2004, government price controls through trade-quota restrictions and loan guarantees priced U.S. sugar at more than 20 cents a pound, which is about two-and-a-half times the world price. This means that Americans spend about $2.5 billion more a year in higher prices for sugar and food items that contain sugar than if this country enjoyed a free market in sugar. The gains from this sweet deal are conferred upon the sugar plantation owners, most of whom own large conglomerates and are financially healthy.
One impact of the artificially high price of sugar is that candy makers and other domestic food producers that use sugar as an ingredient have started to export their production facilities in order to get lower cost sugar to keep their prices competitive. A few years ago, Life Savers, the producer of hard candy, moved its operations to Canada to have access to lower-priced sugar. Thousands of jobs are lost in just this way.
How is the racket perpetuated? One answer is that sugar producers have tremendous political influence. Geographically concentrated in Florida, Louisiana, and key upper-Midwest swing states, they practically invented the political patronage game. And there has been no change in recent years: Since 1990 the industry has donated more than $22 million to politicians, about $12 million to Democrats and $10 million to Republicans.
Sugar has consistently been protected in farm bills, including the 1996 Freedom to Farm Act (which failed in its attempt to end farm socialism in America) and the bloated 2002 farm bill that again extended sugar quotas and tariffs. Carve-outs for sugar have been included in all of our recent trade agreements, nearly derailing negotiations on a pact with Australia last year. And despite provisions that would mean only a very modest increase in sugar imports, the industry is lobbying fiercely against the pending Central American trade deal.
But the sugar industry now faces new competitive pressure. This time it’s not coming from foreign producers but from lo-cal artificial sweeteners. The latest target of big sugar’s wrath is the sugar substitute called Splenda. Big sugar is doing all it can to bully this competitor off the shelves.
Most alternative sweeteners are made of corn syrup, which, for instance, is now used in most soft drinks. Researcher Michael Fumento of the Hudson Institute recently calculated that sugar and corn syrup add about 700 calories a day to the average American’s diet, which accounts for up to a third of the recommended daily calorie level. With obesity now becoming one of America’s largest public health problems, the lo-cal market is surging for pink- and blue-packet products like NutraSweet, Sweet ‘N’ Low, and now Splenda.
Splenda is a runaway financial success. The zero-calorie sweetener, approved by the FDA in 1998, has already captured more than half of the market for artificial sweeteners. And here’s what’s causing heart palpitations over at Big Sugar: Splenda is now doing something that other artificial sweeteners have failed to do — cut into sugar’s market share. Sugar sales are declining — they were down 1.8 percent in 2003 and dropped another 4.31 percent in 2004.
Naturally, Big Sugar has furiously lobbied health authorities, but to no effect. Studies have consistently shown that Splenda is safe, meaning that science has triumphed over raw political power. If anything, a very strong case can be made that sugar is worse for your health than Splenda because sugar contributes to obesity.
But now the sugar producers are using more desperate tactics. They’ve turned to the government to shut down their competition — this time through lawsuits and complaints to the Federal Trade Commission. Big Sugar alleges that Splenda is engaging in false advertising when it says that “Splenda is made from sugar, so it tastes like sugar.” The trouble for the sugar industry is that this claim is true — it is made from sugar. And isn’t the fact that millions of Americans are choosing to buy Splenda a pretty strong signal that consumers do like the way it tastes?
After nearly two-hundred years of government giving Big Sugar special privileges, shouldn’t government force free and open competition in this industry? In the next farm bill, trade barriers and price supports for the sugar industry should be torn down as they reduce consumer sovereignty.
At the same time, the specious claims against sugar substitutes like Splenda should be dismissed. Consumers should be king in cases like this, not the deep-pocketed lobbyists who are employed by Big Sugar. This industry has enjoyed nearly two centuries of protection and has never been competitive. It’s time to put the interests of millions of consumers ahead of the handful of influential sugar producers.
– Stephen Moore is president of the Free Enterprise Fund and a senior fellow at the Cato Institute. Phil Kerpen is policy director at the Free Enterprise Fund.