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Brittany Haga

on 26 April 2010

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Transcript of Sugarmania

Sugar Coating a Bad Policy...? Sugar Cane History of Government Intervention World Production and Prices U.S. Prices External Effects Loss of Consumer Surplus Brazil, India, China, and Thailand: the four biggest producers of sugar
World prices on the rise
This year’s expected price is around 24 cents/lb
Brazil is largest exporter of sugar 1789
First Congress passes the first sugar tariff
30 Acts dealing with sugar passed in Congress
1934 Jones-Costigan Act
6 key points
Lasted until 1947
Sugar Act of 1948
Cuba gets preferential treatment
Helped USA in WWII with cheap sugar
Preferential treatment revoked in 1960
Demise of Sugar Act
Expired in 1974
Reasons for not renewing: energy crisis, inflation, lead to swelling of prices, Act could not keep up
The quota changes equilibrium so that consumer surplus is lost
Deadweight loss results
Price of sugar increases, quantity decreases
The consumer pays for producers’ (both foreign and domestic) gains and for deadweight loss
Origins and Spread
Southeast Asia India Middle East Europe New World
Slave labor U.S. imports dropped dramatically: from 5 million to 1 million tons yearly
High cost to sugar exporters in potential revenue lost
Depresses world prices: much lower than the cost of even the most efficient producers
Keeps poverty levels in developing countries high
Anti-development, discourages diversification Average U.S. price: 22¢
Average world price: 10¢
Prices are expected to rise in 2009/2010

U.S. doesn't have comparative advantage in this case
Is, instead, protecting national sugar producers
Guarantees the price of sugar, limits imports

Debate over tariffs has become fiercer with production of ethanol 1974
Global quota of 7 million tons
Import restrictions on refined sugar eliminated
Sugar hits record price: 30¢ per pound
Sugar processors received the difference between the market price and 13.5¢
13.5¢ becomes 18¢ after sugar prices rise
1990 Farm Bill
Allows government to control market if imports are projected to be less than 1.25 million tons.
1996 Farm Bill
Import quota system remains
Controls on Domestic Sugar eliminated
Renewed as the 2002 Farm Bill
Contains no changes
Full transcript