Economist's View: "Bad Economic Policy, Bad Energy Policy, and Bad Foreign Policy"
リンク: Economist's View: "Bad Economic Policy, Bad Energy Policy, and Bad Foreign Policy".
James Surowiecki of The New Yorker explains why tariffs, quotas, price guarantees, and subsidies in the sugar and ethanol markets are "bad economic policy, bad energy policy, and bad foreign policy":
Deal Sweetners, by James Surowiecki, New Yorker: America ... consume[s] ... close to ten million tons of sugar every year. But American sugar producers aren’t satisfied with supplying the most sweet-hungry population in the world. They’ve relentlessly sought—and received—special favors... The government guarantees producers a fixed price for domestic sugar and sets strict quotas and tariffs for foreign sugar.
Economically..., this has many obvious bad results. It keeps sugar prices in the U.S. at least twice as high as the world average. It makes it harder for companies that use lots of sugar to do business here—in the past decade, an exodus of candy manufacturers from the U.S. has eliminated thousands of jobs. And import restrictions make Third World countries poorer than they’d otherwise be. But protecting sugar also has a surprising consequence: it’s hurting America’s efforts to become more energy-efficient. ...
In recent years, as politicians have tried to deal with high gas prices, concerns about global warming, and America’s dependence on OPEC, a new savior has been found: ethanol. Ethanol has all sorts of virtues. ... So Congress has mandated that four billion gallons of ethanol annually be blended with gasoline, and it also subsidizes ethanol production with a fifty-one-cent-per-gallon tax credit. These policies have stimulated an ethanol boom...
Unfortunately, the ethanol produced in the U.S. comes from ... corn. Corn ethanol’s “net energy balance” ... is significantly lower than that of other alternatives, and modern corn farming isn’t easy on the land. By contrast, ethanol distilled from sugarcane is much cheaper to produce and generates far more energy per unit of input—eight times more... In the nineteen-seventies, Brazil embarked on a program to substitute sugar ethanol for oil. Today, every gallon of gas in Brazil is blended with at least twenty per cent of ethanol, and many cars run on ethanol alone, at half the price of gasoline.
What’s stopping the U.S. from doing the same? In a word, politics. The favors granted to the sugar industry keep the price of domestic sugar so high that it’s not cost-effective to use it for ethanol. And the tariffs and quotas for imported sugar mean that no one can afford to import foreign sugar and turn it into ethanol, the way that oil refiners import crude from the Middle East to make gasoline. Americans now import eighty per cent less sugar than they did thirty years ago. ...
We could, of course, simply import sugar ethanol. But here, too, politics has intervened: Congress has imposed a tariff of fifty-four cents per gallon on sugar-based ethanol in order to protect corn producers from competition. ... [T]he Bush Administration proposed eliminating the ethanol tariff this past spring, but Congress quickly quashed the idea ... [T]he sugar quotas appear to be as sacrosanct as ever. ...
Our current policy is absurd even by Washington standards: Congress is paying billions in subsidies to get us to use more ethanol, while keeping in place tariffs and quotas that guarantee that we’ll use less. ... Because of the ethanol tariffs, we’re imposing taxes on fuel from countries that are friendly to the U.S., but no tax at all on fuel from countries that are among our most vehement opponents. Congressmen justify the barriers to foreign ethanol with talk of “energy security.” But how is the U.S. more secure when it has to import oil from Venezuela rather than ethanol from Brazil? These tariffs are bad economic policy, bad energy policy, and bad foreign policy. ...
Posted by Mark Thoma on November 20, 2006 at 12:33 AM in Economics, International Trade, Policy, Politics, Regulation | Submit to Digg | Add to Del.icio.us | Reddit This | Permalink
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Comments
Is this the reason why "soft drinks", candies and other sweet products have "high-fructose corn syrup" as an ingredient rather than sugar?
"Americans now import eighty per cent less sugar than they did thirty years ago. ..."
This was around the time high-fructose corn syrup was introduced.
This is also the start of the rise in obesity in the population.
Posted by: evagrius | Nov 20, 2006 5:45:02 AM
Evagrius - I agree that HFCS has a nasty effect on metabolism. Unlike sucrose or glucose, it enters the body without triggering an insulin response. Before the medical establishment re-discovered sugar metabolism fructose was even recommended as a sweetener for diabetics!!!
Interestingly widespread use of HFCS was accomplished with no fanfare or oversight, while sugar substitues are viewed with great suspicion.
Posted by: Idaho_Spud | Nov 20, 2006 6:00:21 AM
Evagrius, you're right to make the connection. Although HFCS is now so cheap to make that most economists think it would continue to be used in soft drinks, etc., even if the sugar tariffs/quotas were repealed, the use of it was jumpstarted by the quotas, which made it much cheaper for companies to use HFCS instead. So you can add all the problems HFCS has created to the list of bad things the tariffs have done.
Posted by: K. Williams | Nov 20, 2006 6:23:37 AM
This is another example of why arbitrary tariffs to protect certain politically powerful favored industries are net losses. In addition to raising the price of sugar domestically, this protection causes the loss of import dependent jobs.
Posted by: DRR | Nov 20, 2006 8:14:37 AM
Did anyone mention the destruction of the Everglades at the hands of the Florida sugar industry, or the seven billion dollars being spent to rescue it in a bizarre way, aimed at protecting that useless industry?
Posted by: Bruce Wilder | Nov 20, 2006 9:49:11 AM
I guess the sugar industry's been sweetening the money pots of politicians for so long that they haven't realized how bitter it is for the rest of us.
Sorry :)
Posted by: evagrius | Nov 20, 2006 10:18:48 AM
The unmitigated use of HCFS (especially when on an economic basis, alone) also deprives Americans of choice. We do NOT have the choice to purchase a COKE or PEPSI product that is made with sugar, or without HCFS.
Posted by: fiskhus jim | Nov 20, 2006 11:26:02 AM
http://pollan.blogs.nytimes.com/?p=24
May 24, 2006
The Great Yellow Hope
By Michael Pollan
I've been traveling in the American Corn Belt this past week, and wherever I go, people are talking about the promise of ethanol. Corn-distillation plants are popping up across the country like dandelions, and local ethanol boosters in Minnesota, Illinois, Iowa and even Washington State (where Bill Gates is jumping into the business) are giddy at the prospect of supplanting OPEC with a homegrown, America-first corn cartel. But as much as I'd like to have a greener fuel to power my car, I'm afraid corn-based ethanol is not that fuel.
In principle, making fuel from plants makes good sense. Instead of spewing fossilized carbon into the atmosphere, you're burning the same carbon that a plant removed from the air only a few months earlier — so, theoretically, you've added no additional carbon. Sounds pretty green — and would be, if the plant you proposed to make the ethanol from were grown in a green way. But corn is not.
The way we grow corn in this country consumes tremendous quantities of fossil fuel. Corn receives more synthetic fertilizer than any other crop, and that fertilizer is made from fossil fuels — mostly natural gas. Corn also receives more pesticide than any other crop, and most of that pesticide is made from petroleum. To plow or disc the cornfields, plant the seed, spray the corn and harvest it takes large amounts of diesel fuel, and to dry the corn after harvest requires natural gas. So by the time your "green" raw material arrives at the ethanol plant, it is already drenched in fossil fuel. Every bushel of corn grown in America has consumed the equivalent of between a third and a half gallon of gasoline.
And that's before you distill the corn into ethanol, an energy-intensive process that requires still more fossil fuel. Estimates vary, but they range from two-thirds to nine-tenths of a gallon of oil to produce a single gallon of ethanol. (The more generous number does not count all the energy costs of growing the corn.) Some estimates are still more dismal, suggesting it may actually take more than a gallon of fossil fuel to produce a gallon of our putative alternative to fossil fuel.
Making ethanol from corn makes no more sense from an economic point of view. The federal government offers a tax break of 54 cents for every gallon of ethanol produced, and this incentive is what has generated the enthusiasm for ethanol refining: the spigot of public money is open and the pigs are rushing to the trough. (At the same time, the government protects domestic ethanol producers by imposing a tariff of 54 cents a gallon on imported ethanol.) According to the Wall Street Journal, it will cost U.S. taxpayers $120 for every barrel of oil saved by making ethanol. Some "savings." This is very good news indeed for Archer Daniels Midland, the agricultural processing company that controls about 30 percent of the ethanol market. (And, it would seem, a comparable percentage of the U.S. Congress, which has been showering the company with ethanol subsidies since the days when Bob Dole of Kansas was known as the senator from A.D.M.)
Absurd as it is, the rush to turn our corn surplus into ethanol appears unstoppable....
Posted by: anne | Nov 20, 2006 11:49:25 AM
C.A.F.T.A. may help here. A news item some time ago mentioned that Braziliam ehtanol manufacturers are hastily setting up shop in several Carribbean countries. The sugar lobby must have been asleep at the switch, because CAFTA signatories can evidently ship ehtanol to the states without the tariff that is imposed on the Brazilian product. Revenge is sweet!
Posted by: Tom Schofield | Nov 20, 2006 1:32:03 PM
