Sugar tariffs and Hostess

Posted in the Ohio Forum

xxxrayted

Cleveland, OH

#1 Nov 18, 2012
Did Congress kill the Twinkie? The tariff tale behind the Hostess demise.
By Patrik Jonsson, Staff writer / November 16, 2012

It’s the end of a lunchbox era as baked icons such as Twinkies, Hostess CupCakes, and Wonder bread face extinction amid a contentious labor dispute, which ended Friday in the declared liquidation of Hostess Brands Inc., the Texas-based confectioner.

So far, Big Labor has gotten the brunt of criticism for the demise of Hostess, since the Bakery, Confectionery, Tobacco Workers ,and Grain Millers union refused, despite warnings from fellow union heads, to return from strike at some 20 facilities nationwide. That forced CEO Gregory Rayburn to declare, after two rounds of bankruptcy proceedings, that “it’s over.”

Yet as the political recriminations echo amid news of 18,500 lost jobs in an already sluggish economy, some economists suggest that Americans shift their blame from Big Labor to the role Congress might have played in writing the Twinkies’ obituary.

IN PICTURES: Twinkies and Wonder bread forever!

And that, economists say, may come down to one sweet little word: sugar.

Since 1934, Congress has supported tariffs that benefit primarily a few handful of powerful Florida families while forcing US confectioners to pay nearly twice the global market price for sugar.

One telling event: When Hostess had to cut costs to stay in business, it picked unions, not the sugar lobby, to fight.

“These large sugar growers ... are a notoriously powerful lobbying interest in Washington,” writes Chris Edwards of the Cato Institute in a 2007 report.“Federal supply restrictions have given them monopoly power, and they protect that power by becoming important supporters of presidents, governors, and many members of Congress.”

Such power has been good for business in the important swing state of Florida, but it has punished manufacturers who rely on sugar in other parts of the United States, the Commerce Department said in a 2006 report on the impact of sugar prices.

Sugar trade tariffs are “a classic case of protectionism, pure and simple, and that has ripple effects through other sectors of the economy, and, for all I know, the Hostess decision is one of them,” says William Galston, a senior fellow at the Brookings Institution in Washington.

Trade restrictions on sugar have a long, complex history, and sugar is certainly not the only major industry to have Congress play nose tackle against global prices by restricting imports. Yet as those policies have come under fire in the past decade, both Republicans and Democrats have so far refused significant reforms.

That refusal to address tariffs that neither support infant industries nor provide national security has come despite damning reports from the Commerce Department about the impact on US jobs, including the fact that for every sugar job saved by tariffs, three confectionery manufacturing jobs are lost.

Some of those job losses came when candy companies like Fannie May and Brach’s moved the bulk of their manufacturing to Mexico and Kraft relocated a 600-worker Life Savers factory from Michigan to Canada, in order to pay global market prices for sugar.

http://www.csmonitor.com/content/view/full/60...

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