USDA may increase sugar quotas

The Wall Street Journal reported today that the U.S. Department of Agriculture may increase the import quotas for sugar to address a tightening supply and possible shortages.  Currently, about 40 countries can export a specified quantity of sugar to the U.S. under what’s called a tariff rate quota (TRQ).  TRQ sugar has low or no tariffs, while above those amounts, sugar is subject to stiff tariffs. Only one country, Mexico, under the North America Free Trade Agreement, is not under the quota system.

Under the 2008 Farm Bill, the USDA had to wait until April 1, 2010 to decide whether to increase the quotas.  Last week, the U.S. Trade Representative announced that it was reallocating some of the 2010 quota amounts that hadn’t been used by certain countries to quota-holding countries that are exporting sugar to the U.S.   Brazil, the Dominican Republic, the Philippines, and Australia received the bulk of the reallocations.

The TRQ system is part of the U.S. sugar program that keeps the price of U.S. sugar generally twice as high as the world price through domestic supply constraints, import restrictions, and price supports for U.S. producers. It’s a central planning approach that raises the cost of sugar and sugar-containing products for consumers, causes job losses as confectionery firms are hit by higher costs, and harms poor sugar-producing countries that can’t compete with U.S. “subsidized” sugar.  See some CEI ideas for terminating this program.