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increase a person’s risk of cancer.78 After the WHO published a critical re- port in 2003, the global sugar and food industries rallied to dilute WHO ef- forts to combat obesity. 79

In the short run, sugar demand is highly inelastic, but consumers are probably more responsive to sugar price increases in the long run.80 Even though there are persuasive health reasons for keeping sugar prices high— and even raising them as a means of discouraging consumption—that does not mean that high prices should confer a windfall on sugar produc- ers, the world norm today. It makes no more sense to enrich “Big Sugar” than it would to foster a Tobacco Monopoly or Whisky Trust. Instead, high sugar taxes, used to augment public revenues, should be preferred. That said, we turn to the actual practice of sugar policy under NAFTA.

NAFTA and Sugar

Within NAFTA (as in the world at large) the basic fight is over who gets rich from the high sugar prices that result from multiple means of protec- tion. Since the government does not receive revenues, the contest is be- tween competing producer interests.

North America contains two major sugar producers, the United States and Mexico.81 The United States is the world’s fourth largest sugar pro- ducer; Mexico is the seventh largest producer. Both countries extensively protect and support domestic sugar production. The key difference is that for most of the past decade Mexico has been a net sugar exporter, while the United States is a net importer (table 5.8). Over the past five years, US net sugar imports from the world averaged 1.3 million metric tons per

  • 78.

    See Philip Abelson and Donald Kennedy, “The Obesity Epidemic,” Science, June 4, 2004.

  • 79.

    The US sugar lobby is the largest agricultural industry donor to political campaigns, giv-

ing more than $20 million to federal politicians since 1990. For details about the political economy of the US sugar industry, see Elliott (2005). In response to the 2003 WHO report, the US Sugar Association claimed the WHO used faulty science and threatened to ask con- gressional appropriators to challenge future US contributions to the WHO (running at some $400 million annually). See Edward Alden, Neil Buckley, and John Mason, “Sweet Deals: ‘Big Sugar’ Fights Threats from Free Trade,” Financial Times, February 27, 2004. We thank Tim Josling for comments on an earlier draft.

80. Tobacco taxes illustrate the potential for limiting sugar consumption through vigorous application of the price mechanism. During 1990–93, when the Canadian government used taxes to double the real price of cigarettes, annual cigarette consumption per capita declined from about 81 packs to 52. Through high sugar prices, a similar decrease in sugar consump- tion might be achieved. See World Bank (1999).

81. Canada is a minor producer; imports cover almost all of the domestic consumption (see table 5.8).

312

NAFTA REVISITED: ACHIEVEMENTS AND CHALLENGES

Institute for International Economics | www.iie.com

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