Will America Run Out of Sugar? The Situation is not Very Sweet

The Wall Street Journal reported today that some companies are concerned that the government’s quotas on sugar imports might result in America running out of sugar.  So, what’s going on with sugar any way?  What’s the problem?

Well, the situation is not very sweet.  Instead of a completely free market in sugar, America’s USDA regulates how much sugar can be imported into the U.S.  Currently, America produces most of the sugar it needs for domestic use.  But, about 15% of its requirements for sugar must come from other countries.   These imports are tightly regulated by the USDA, ostensibly to help out American farmers (yet, hurting American consumers at the same time).

Economists know that when you limit supply, you increase prices and you often induce artificial shortages.  Sugar quotas imposed by the government have resulted in the price of sugar in America being nearly double the price of sugar in the global market.  American consumers are paying a lot more for sugar!

The quotas placed on sugar imports should be eliminated.  Everyone is hurt by the existing quotas.  Millions of American consumers are paying higher prices for sugar and the products that utilize sugar in their manufacture or production.  Even farmers lose out because they are consumers too.  Overall, the American Economy loses out because scarce economic resources, capital and labor, are being deployed in a less efficient manner.  We should buy our commodities, in this case – sugar, from the least costly and most efficient producers, regardless of where in the world they might be located.  Free markets use scarce economic resources in the most efficient way possible.

Will America run out of sugar?  We will see.  But, eliminating sugar quotas would certainly sweeten up the situation for everyone.