Haiti and U.S. Sugar Policy

The tragic earthquake in Haiti has had me wondering about U.S. Sugar policy.  I should warn readers in advance that both Haiti and sugar policy are topics I know little about.  All I really know about Haiti is that it shares a history with many similarities to other struggling Caribbean islands, with roots in colonial sugar plantations, rum and slavery, only much, much worse.  And my knowledge of U.S. Sugar policy is somewhat superficial.

So, here's the basics of U.S. sugar policy.  Like other agricultural policies, U.S. sugar policy got its start in 1934 during the Great Depression.  With prices of agricultural commodities (and everything else) plummeting, the government wanted to support prices in an effort to support farmers' incomes.  After all, back then, a lot more of us were farmers, and unlike today, most farmers were poor.  A lot of what the government did back then, even if it had good intentions, probably did more harm than good.  People were hungry too, and one thing they did was destroy crops and limit agricultural production in an effort to support prices, which didn't help people to eat.  But these policies probably did help to support farm incomes.  And to some extent they still do.

But an important thing to realize is that sugar was different.  It was (and is) different from the other commodities because the U.S. imports a lot of it.  Thus, to support prices, the government did not need to limit domestic production as much as it needed to limit imports.  So, ever since the 1930s, the U.S. has supported a minimum price for sugar by placing a quota on the amount of sugar imports.  (Two short-lived exceptions were in the early 70s and early 80s, when world prices spiked and the quota was lifted.) Restricting imports has kept domestic sugar prices higher and less variable than world prices, which has created considerable rents to the favored exporting nations with large quotas.

The price supports led to much greater domestic sugar production than there would have been otherwise, a lot of it around the Everglades in Florida, with some significant environmental problems as a consequence.  The quotas and price supports also spurred the development of corn syrup which could be made from domestically produced corn.

Here's a picture showing U.S. and world sugar prices, adjusted for inflation:




Europe has also supported sugar prices by limiting imports.  In fact, the support prices in Europe have been similar or greater than those in the U.S.  Many of the Caribbean islands have been beneficiaries of this quota-generated largess, with other less or unfavored nations left to market their sugarcane at world prices, which could be as little as one-third U.S. and European prices.

But beginning in 2005, Europe began winding down its sugar import restrictions.  This has caused production to decline in Europe and those Caribbean nations that had favored export status to Europe at their elevated prices.   It has also caused world sugar prices to rise.  While U.S. sugar policy is alive and well it is under increasing pressure, in part due to rising sugar prices, pressure from food producers, but probably also due to trade liberalization in Europe.

So what does all of this have to do with Haiti?  Well, one of the most fascinating and tragic dichotomies is that between the Dominican Republic and Haiti.  By Caribbean standards, the Dominican Republic comparatively modern and wealthy while Haiti, in contrast, is one of Caribbean's and world's poorest nations.  Yet the Dominican Republic and Haiti share the same island.

The Dominican Republic also possesses the largest share of U.S. sugar quota, equal to well over 20 times that of Haiti's. (See here)

And so I wonder: How much of the Dominican Republic's success relative to that of Haiti has to do with the fact that it received a much larger share of the U.S. sugar quota? 

There's probably not a clear answer to this question.  But it stands to reason that U.S. policy has at least something do with Haiti's larger challenges, which have, in turn, made them so vulnerable to natural disasters.

Update: Here is some background reading on sugar policy

Comments

  1. i believe its been our longstanding foreign policy to keep haiti poor & dysfunctional, because the shipping lanes from asia and the west coast to the US east coast go between cuba and hispanola...

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  2. I suspect the sugar quotas were probably originally based on historic patterns of imports over a base period immediately preceding the time quotas were established. Whether or not lobbying and political machinations later took quota from Haiti and moved it elsewhere is a question.

    Is having quota a good thing in the long run, you think? Or, rather like tobacco quotas, do they have the effect of locking in production patterns?

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  3. Bill:

    I don't know the long history. But current quota shares are tied to imports during the unrestricted price-spike years when quotas were lifted. But I rather imagine those production quantities had explicit and implicit ties to policies going back to the 30s and earlier.

    I would think history may have had the effect of locking in production patterns, at least to some extent. Obviously I'm speculating--I need to dig into it more to have an opinion.

    Clearly the Dominican Republic and domestic sugar growers have gained handsomely from these quotas. Clearly consumers have paid an implicit tax in the form of higher sugar and soda prices, among other things. And there have been substantial environmental costs. I don't see how the good has outweighed the bad. But then I can see how removing the quotas suddenly, especially during a time of low prices, could also cause unintended consequences.

    Anyhow, even if these policies were important for development patterns in the Caribbean, going forward, I think sugar will be much less so. I also imagine the quotas could go away soon.

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  4. "quotas could go away soon"? They probably ought to, but I'm too old to believe that. They went away briefly in the 80's and quickly got reinstated.

    I guess the argument is: if Haiti had had a higher quota, sugar producers would have received higher prices. But I wonder whether the workers on the plantations would see the benefits, or would the landowners and processors have taken the gains.

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  5. Bill Harshaw,

    Sadly, I think we're past the point where removing quotas might make much of a difference. That's just my impression from pouring over a lot of the data. World prices are still pretty low and wouldn't go up that much if the U.S. dropped its quotas. Ramping up production in Haiti would be tough because they no longer have the processing facilities. There would probably be some gains to some African countries, like Zimbabwe.

    If we removed the sugar quotas and tariffs, kept ethanol subsidies, and removed the tariff on ethanol imports, then we might have a different picture. While such a scenario would be better than the current situation, I'm still not so sure about those ethanol subsidies.

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  6. Haiti hasn't exported any sugar since at least 1999, and was a net importer of sugar of 182,000 tonnes last year. I'm guessing that lifting Haitian TRQ (tariff rate quota, how the US imports sugar from countries other than Mexico) would do little good.

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  7. Looking into more records, Haiti hasn't even produced any sugar since at least 1999.

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  8. Haiti *is* producing sugar. It's just that they are not *exporting* sugar. But I agree that it might make little difference to remove the quotas now.

    But how different would things be today if sugar quotas were lifted fifty years ago?

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  9. Protectionist sugar policy has been in place since long before the 1934 quotas.

    http://www.fff.org/freedom/0498d.asp

    This country been interfering with the sugar market for nearly 200 years. It has however, gotten much worse in the last 75 years and gotten REALLY bad since Reagan's presidency.

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  10. I am only vaguely familiar with our sugar policy, knowing only that it's restrictive. It's unintended consequence is that our domestic sodas are overwhelmingly made with corn syrup. My sons are in celebration over the "throwback" release of pepsi and have stocked up on it. They also try to buy cokes imported from Mexico (where sugar is still used as an ingredient)whenever possible.

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  11. Interesting idea. Have you read anything by Derrick Jensen (Culture of Make Believe) or Michael Pollan (Omnivore's Dilema). They discuss this type of issue at length. It is truely frightening how long the reach of unintended .consequencess(or intended consequences) can be.

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  12. We could produce more gallons of ethanol per using sugar beets as a crop instead of corn, but because of the protection of the sugar industry and the goverment supports for corn, that has not and probable will not happen. We need to remove outdated market barriers. Agriculture should produce what is demanded by the market.

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  13. Cropsmith, agriculture does produce what is demanded by the market. The only problem is that the market is distorted by the government. I would guess, with limited information, that if corn ethanol supports were removed (along with ethanol mandates, etc), there would be little demand to spur ethanol production from anything (cellulosic, sugar beets, algae) until gas prices go back up to $4.50 + per gallon. While the rents sought by sugar beet producers might be less than that of corn producers, they still wouldn't be profitable without government support. It is hard to make these speculations however, as agricultural markets are so distorted by government (ours' and others') that God knows what would happen were all these trade barriers and subsidies removed.

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  14. Ok,
    what would happen if the US wanted to cut a deal with Haiti in an effort to support their economy that we would buy 30% of sugar that the US imports from Haiti at a fair market price with the understanding that the money generated from this agreement with Haiti must go into rebuilding Haiti and schools for the children of Haiti? This money must be locked down and there must be a UN person to oversee this operation. I so want these people to be able to be self sufficient but they have to have honest help to get to that. These NGO's who are just sitting around and doing nothing need to get out of Haiti because Haiti does not need that.

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  15. How does one learn about the quotas, the new HOPE legislation, has that done any good for Haiti on the Sugar quota aspect?

    What was 2011 production of sugar in Haiti? And what % was exported?

    How much tonnage of sugarcane is grown in Haiti?

    What is the 2011 going price for Confectioners sugar? On the world market and in the USA.

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  16. I am of a similar opinion to RJS that the treatment of Haiti by the US government is wilful and intended to keep them as a very poor 3rd world nation.

    My hypothesis as to why this is: Because Haiti's black slaves had the audacity to revolt against their white owners and worse; won their freedom. Then in more recent years, the masses dared to rise up against Baby Doc Duvalier who was the puppet of his US Republican masters and thus earning the scorn of Reagan/GH Bush. The US Democrats did not support either Duvaliers' government.

    And true to US racism, being Hispanic is not as bad as being black, therefore the US is more likely to help The Dominican Republic in real and meaningful ways before Haiti. For disclosure sake, I am bi-racial (white/black) and my family has roots in Haiti.

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