The US Sugar Policy - Case Study Essay Example | Topics and Well Written Essays - 1250 words

The US Sugar Policy - Case Study - Essay Example All capital markets are beginning to connect world wide, and this affects even those who are not globally connected. The larger economies will at some point influence those not globally invested as their performance begins to evolve and shape the global financial markets. There may be no other free-trade policy like the U.S. sugar program that illustrates such hypocrisy, and the need for reform. The United States has often prided itself as a world leader in terms of the free trade movement. The culture has always pushed for Globalization and the use of technology to integrate economies. However, there are some industries that remain well protected due to the strength of forceful interest groups and absence of pressure to reform. These protection barriers often hurt our domestic economy and counteract the efforts to promote more open markets and trade negotiations around the world. (Grombride, Mark) In this paper I will examine the flaws in the U.S. Sugar Policy and demonstrate how th ey affect domestic and international farmers. This essay will also demonstrate to show how globalization is reflected in the consumption, production and labor of the sugar industry. The U.S. Sugar policy operates under the Farm Bill, which was overwhelmingly passed in 2008 by Congress. The basic premise behind the sugar policy is that supply should equal demand. The U.S. Department of agriculture has imposed several tools in order to ensure that the sugar policy operates at a minimum cost to the taxpayers. These tools are that: first, they can limit foreign imports to those required in the trade agreement obligation with the exception of Mexico; second, they can control the amount of sugar the U.S. American farmers are allowed to sell; and third, the bill can divert any excess surplus of sugar into ethanol production. (American Sugar Alliance) These tools and policies such as the preferential loan agreements and tariff rate quotas, serve to effectively keep foreign sugar out of the U.S. In return this forces the price of sugar in our market to increase substantially. According to the World Agricultural Supply and Demand Estimates, the U.S. Production projection for sugar produced in April of 2011 was 7,950,000 short tons raw value and the import amount was 3,135,000 short tons raw value. The amount projected in export equaled just 225,000 short tons. In areas such as the Caribbean, sugar is one of their largest earning industries. However, during the past two decades, Caribbean agriculture has experienced a decline in their agricultural production. Once globalization occurred the countries in the Caribbean were greatly affected as the some of the most vulnerable producers. This was due to their limited physical size not allowing them to benefit from economies of scale. For them this translated into higher world prices for production of their main principal products. The Caribbean exported only 669,630 tones of sugar around 2000. (Ahmed, Belal) There are severa l factors that determine the international competitiveness of sugar production. Some of these factors include: tariffs and quotas, the availability of sugar as a natural resource, the cost of production, and international trade agreements. Tariffs and quotas affect the sugar market as American consumers and business are forced to purchase sugar at the U.S. average price vs. the world price. This is due to our low import of foreign sugar. Government enables have protected domestic sugar growers by placing trade restrictions