The government should replace outdated sugar import rules that guarantee higher revenue to domestic growers and drive up food costs, said the Government Accountability Office on Tuesday. “The program creates higher sugar prices, which cost consumers more than producers benefit, at an annual cost to the economy of around $1 billion,” it said.
In a report, the GAO, a congressional agency, recommended that the USDA and the U.S. trade representative’s office evaluate alternatives to the tariff-rate quotas that have been used for years to regulate imports of foreign sugar. “USDA and USTR provided comments by email stating that they concur with our recommendations,” the report said.
At least three alternatives, such as a first-come, first-served approach, exist to the current tariff-rate quota system, which parcels out quotas by country, but they have not been considered, said the report. Quota administrators said that modernization could be a fraught process, since sugar-exporting nations might challenge U.S. reforms under world trade rules or use them as justification for changing the rules on U.S. exporters.
The U.S. sugar program guarantees a minimum price per pound for domestically produced sugar and is supposed to operate at no net cost to the government. Import quotas are intended to fill the gap between domestic production and U.S. sugar demand without creating price-depressing surpluses. The tariff-rate quota system means that some foreign sugar enters the United States duty-free but larger volumes face a tariff. About a quarter of the sugar consumed in the United States is imported.
“The timing of tariff-rate quota reallocations and increases and the quota allocation method for sugar imported under U.S. WTO commitments do not reflect current market conditions, and have led to import shortfalls averaging 13 percent per year since 2006,” said the GAO.
To read the GAO report on sugar import quotas, click here.