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Jewish World Review Feb. 12, 2004 / 20 Shevat, 5764

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Consumer Reports

Sweet And Sour Subsidies


http://www.NewsAndOpinion.com | Saturday, Valentine's Day, sweets will be showered on sweethearts — a bonanza for candymakers. But the very next day all 242 Fannie May and Fanny Farmer chocolate candy stores will be closed.

They and many jobs — 625 of them at the firm's 75-year-old Chicago manufacturing plant — are, in part, casualties of that outdated facility, bad business decisions, and high U.S. labor and other costs. But jobs in America's candy industry also are jeopardized by protectionism, which is always advertised as job protection. In this case, the protectionism is an agriculture subsidy — sugar import quotas.

Chicago is no longer Carl Sandburg's wheat stacker and hog butcher, but it remains America's candy capital, home of Tootsie Rolls and many other treats. In 1970, employment by the city's candy manufacturers was 15,000. Today it is under 8,000, and falling.

Alpine Confections Inc. of Utah has bought Fannie May and Fanny Farmer and may continue some products. This is partly because the price of sugar is less important in soft chocolates than in hard candies.

But the end of 2003 brought the end of Brach's production of hard candy on the city's West Side. A decade ago, Brach's employed about 2,300 people. Until recently, many of the remaining Teamster jobs paid $19 an hour. Many signs in the abandoned Chicago facility were in Spanish, Polish and Greek for the immigrant workforce, most of whose jobs have gone to Mexico. Labor is cheaper there, but so is 92 percent of the raw material for hard candy — sugar. By moving outside the United States, Brach's can pay the world market price of sugar, which is one-half to one-third of the U.S. price as propped up by import quotas.

Life Savers, which for 90 years were made in America, are now made in Canada, where labor costs are comparable but the yearly cost of sugar is $10 million less. Chicago's Ferrara Pan Candy Co., maker of Jawbreakers, Red Hots and Boston Baked Beans, has moved much of its production to Mexico and Canada.

Dueling economic studies, few of them disinterested, purport to demonstrate that more American jobs are saved or — much more plausibly — lost because protectionist quotas raise the price of sugar for 280 million Americans. In the life of this republic, in which rent-seeking — bending public power for private advantage — is pandemic, sugar quotas are symptomatic.


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It was to a North Dakota radio station that Robert Zoellick, the U.S. trade representative, vowed that he would stand like Horatius at the bridge to block Australian sugar. The quotas can be considered among the bearable transaction costs of democracy, keeping North Dakota's, Minnesota's and other states' growers of sugar beets as well as Florida's, Louisiana's and other states' growers of sugar cane from starving.

Or seceding. Or, heaven forfend, being forced to grow something else. But protectionism is unconservative, unseemly and unhealthy — indeed, lethal.

Unconservative? Protectionism is a variant of what conservatives disparage as "industrial policy" when nonconservatives do it. It is government supplanting the market as the picker of economic winners. Another name for industrial policy is lemon socialism — survival of the unfit.

Unseemly? America has no better friend than Australia. Yet such is the power of American sugar interests that the Bush administration has forced Australia to acquiesce in continuing quotas on its sugar exports to America. That was a price for achieving the not-exactly "free trade" agreement signed last weekend. But look on the bright side: Restrictions on beef imports will be phased out over 18 years.

Is protectionism lethal? Promoted by Democrats hawking their compassion, protectionism could somewhat flatten the trajectory of America's rising prosperity. But protectionism could kill millions in developing nations by slowing world growth, thereby impeding those nations from achieving prosperity sufficient to pay for potable water, inoculations, etc. Developed nations spend $1 billion a day on agriculture subsidies that prevent poor nations' farmers from competing in the world market.

Sugar quotas, although a bipartisan addiction, are worst when defended by Republicans who actually know better and who lose their ability to make a principled argument against the Democrats' protectionist temptation. Fortunately, splendid trouble may be on the horizon.

Last September's collapse of the World Trade Organization's ministerial meeting in Cancun, Mexico, meant that the pernicious "peace clause" was not renewed. For nine years it has prevented the WTO from treating agricultural subsidies as what they obviously are — market distortions incompatible with free trade. For Americans, a fight over that is worth having, and losing.

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