Sugar has enjoyed a massively protected status in the USA since 1937 (with the exception of a couple years in the mid 1970s). Tariffs, Quotas, Price Supports, Loans, and Restrictions on Domestic Production have all kept the US price of sugar well above the world price (I don't have exact numbers but I'm pretty sure it has generally been over double the world price). Here is a summary of US sugar policy over time.
Now Sugar has finally met NAFTA and it looks like Sugar will continue its winning streak.
NAFTA had a lot of its provisions phased in, with the more controversial ones pushed back. In the case of sugar, it was 15 years, i.e. now.
As of January 1, Mexican (and Canadian!!) sugar can freely enter the US market. However, the government is still committed to controlling the price of sugar! The new idea is that the Feds will buy up the Mexican exports and (wait for it, 'cause it's freakin' awesome) convert it to ethanol.
That's right folks, it's a perfect storm of stupidity that could get pretty expensive.
And it gets better: According to the WSJ (hat tip to John Thacker):
"Even sugar growers can see the fuss this might create unless Mexican exports are restrained. So they are now circulating still another set of recommendations in Congress that would explicitly control the amount of sugar Mexico is allowed to ship to the U.S., and vice-versa. No new competition would enter either market. To supervise this cartel, the sugar lobby wants Congress to establish a new binational commission. The proposal would also ban the re-exporting of foods (notably candy) that use sugar imported from a third country, and would sharply limit how much sugar could come from third countries. In other words, sugar would be renegotiated right out of Nafta only weeks after it finally took effect."
The articles concludes as follows:
"So Congress and the Bush Administration have to choose: Either defend the economic benefits from an integrated North American market, or bow to one of the world's richest and most destructive special interests."
Anyone wanna bet on the outcome? My money's on the "destructive special interests".
** Muddy Waters y'all!!