WASHINGTON — The Government Accounting Office (GAO) in a 65-page report released Oct. 31 said the US sugar program, administered by the US Department of Agriculture, provides substantial benefits to sugar cane and beet growers because the program guarantees relatively high prices for domestic sugar, while creating net costs to the economy because of the higher prices paid to sugar by consumers.
The American Sugar Alliance (ASA), which represents US sugar producers, quickly countered the GAO claims, while the Sweetener Users Association (SUA), which represents US food and beverage manufacturers, saw the report as confirmation for the need to modernize US sugar policy.
The GAO report said US sugar farmers benefit significantly, and sugar cane and beet farms are substantially more profitable per acre than other US farms. According to the report, the sugar program results in increased domestic sugar production and an estimated $1.4 billion to $2.7 billion in additional benefits to sugar cane and beet growers.
Meanwhile, the US sugar program creates net costs to the economy because higher sugar prices created by the program cost consumers more than producers benefit, the GAO said. According to some studies, the program costs consumers an estimated $2.5 billion to $3.5 billion per year, yielding net costs to the economy of about $1 billion per year. Other studies estimate the program leads to declines in US employment in industries that rely heavily on sugar, such as confectionery manufacturing. In 2022, US consumers, including food manufacturers, paid twice the world price for sugar, the study said.
“GAO continues to make major and obvious errors in their analysis of sugar policy and markets in the United States and in other countries to the detriment of American farm families and workers,” said Rob Johansson, director of economics and policy analysis for the ASA. “We urge Congress to consider the facts, including that global sugar costs of production have routinely exceeded global sugar prices over the past 20 years, clearly evidencing a world sugar market distorted by heavily subsidized foreign sugar. Instead of relying on GAO’s flawed analysis that overlooks common sense and relies on an institutional bias against any policy that helps US farm and ranch families of any commodity.
“It is also unfortunate that GAO’s report ignores the economic contributions of domestic sugar production to local communities, including 151,000 jobs and $23 billion in economic activity, as well as the serious harm done to these communities due to foreign subsidies that profoundly distort the global market and harm US farm families. GAO continues to utilize old studies and estimates that have been discredited. More recent economic studies conclusively demonstrate that any savings from cheaper sugar to the big multinational corporations that buy and use sugar in their products are not passed to American consumers. Instead, they add to the record profits of the users.”
Rick Pasco, president of the SUA, said, “We appreciate the GAO taking a hard look at the US sugar program and confirming that it is in fact a harm to US consumers, sugar-using companies and the overall economy. The case for modernizing US sugar policy to better serve all sugar stakeholders continues to build, and we call on Congress to enact positive reforms in the farm bill.”
The United States is among the world's largest sugar producers and consumers, the GAO said. The Agriculture and Food Act of 1981 contained provisions to support the price of US sugar and, according to the USDA, established the current structure of the US sugar program. The program was reauthorized most recently in 2018 and is up for reauthorization as part of the next farm bill.
“Nearly half of US imports of sugar come from Mexico, and according to studies these imports have a significant effect on the US market,” the report said. “Beginning in 2008, sugar imported from Mexico became duty-free and quota-free. In 2014, the US and Mexico agreed to set a minimum price and quantity limits on Mexican imports. Subsequently, imports of Mexican sugar fell and prices rose, benefiting US sugar producers but increasing the cost to consumers and the economy.”
Nearly half of remaining US sugar imports are subject to trade commitments made through the World Trade Organization (WTO) and free trade agreements. The US Trade Representative (USTR) allocates WTO tariff rate quotas, with input from the USDA, among sugar-importing countries using a method based on 40-year-old data, the GAO said.
“In practice, this has led to fewer sugar imports than planned and delays in obtaining sugar,” the GAO said. “USDA and USTR have not considered alternatives to their allocation method. Without considering new methods, USDA and USTR may be missing opportunities to make sugar allocations more effective and efficient.”
As a result of its findings, the GAO recommended the following: That the USDA evaluate the effectiveness of the current method and alternative methods for allocating raw sugar tariff-rate quotas to determine which would most effectively maintain an adequate sugar supply and minimize costs to the government; That the USTR evaluate alternative allocation and reallocation methods for consistency with US law and international obligations; And that the USTR use the results of those evaluations to validate or change its quota allocation method.
“USDA and USTR concurred with our recommendations,” the GAO said.The GAO was asked to review the effects of the US sugar program. The GAO reviewed agency documents and data and interviewed federal officials, academics and industry stakeholders including groups representing sugar producers and sugar using industries. The GAO also conducted a literature review on the effects of the US sugar program on the economy and trade.