Valentine’s Day is marked by displays of love and affection, but the holiday’s relationship with U.S. policies could be described as love-hate.
On Valentine’s Day people across the country are looking for gifts for their loved ones. Unfortunately for these Americans swept up in the spirit of the holiday, sugar subsidies raise candy prices and introduce other economic distortions. At the same time, trade agreements with other countries have reduced tariffs and lowered prices for roses, making them available and affordable.
The U.S. sugar program consists of a set of income restrictions, minimum price guarantees, and other price supports that result in higher domestic prices for sugar, and by extension products that use sugar, such as candy.
One of the problems with the sugar program, as with almost all government programs targeted to a specific industry, is that the benefits are concentrated while the costs are diffuse. Perhaps the simplest way to show the increased burden on American consumers is the difference in sugar prices to Americans compared to the rest of the world. From 1999 through 2015 the U.S. refined sugar price was 101 percent more expensive in the United States than overseas. In aggregate the costs are substantial, in the range of $2.4 billion to $4 billion, according to a recent study from John Beghin and Amani Elobeid published by the American Enterprise Institute. However, these substantial aggregate costs to U.S. households only translate to about a $10 per person per year.
Most of these losses to households and consumers are transferred to the vested sugar interests from growers to processors, in the range of $1.2 billion, and then passed on to consumers. While the per person cost for the average U.S. consumer is relatively small compared to their total expenditures, the number of beneficiaries is much smaller and the average benefit therefore larger. Even accounting for the transfer to sugar interests, the authors estimate that net welfare losses could approach $1 billion.
In a similar fashion to the recently-announced tariffs on solar panels, policies that ostensibly protect American companies or jobs could have more ambiguous effects. Sugar growers, for example, certainly benefit from the policy. However, companies that use sugar to make their products, such as candy factories and related jobs, are harmed by higher sugar prices that result from U.S. policies. In recent years the makers of Dum Dums, Life Savers, and Jelly Belly beans have cited high American sugar prices as one reason they moved factories to other countries.
While sugar tariffs have added burdens, free trade agreements have made it much easier for Americans to celebrate.
Many of the roses being given to loved ones on Valentine’s Day come from Colombia, where the flower industry has boomed, and cut flower exports to the United States have grown from 97 million in 2009 to 694 million in 2015 (latest data available). As well as the amenable climate, the flower industry in Colombia and American consumers have benefited from the 1991 Andean Trade Preference Act, which lifted duties on Colombian rose exports, among other products. More recently, in 2012 the U.S.-Colombia Trade Promotion Agreement further reduced import fees on Colombian flowers while also reducing Colombian tariffs on U.S. agricultural exports.
While production of the American flower industry has fallen significantly, the shift has led to the creation of many other complementary jobs related to importing Colombian flowers to their end destinations, from truck drivers to logistics coordinators. Over the same period, American consumers have gained access to plentiful, affordable roses that could be the spark of Valentine’s Day.
Sugar subsidies make it more expensive to give candy on Valentine’s Day, but the successful trade agreement with Colombia has made roses abundantly available. So, as wrote the Elizabethan poet Edmund Spenser, “Gather the rose of love whilst yet is time. “
Charles Hughes is a policy analyst at the Manhattan Institute. Follow him on Twitter @CharlesHHughes.
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