Sweetness and Light?

“Nothing is so permanent as a temporary government program.”

“Still Life with Bread and Confectionary” by Georg Flegel, 1650. Source: Wikipedia

I thought of that quote when I read that the Trans Pacific Partnership talks may “disrupt” US sugar policy. Our sugar program is a complex mix of import restrictions, price supports, and loan guarantees designed to protect the domestic sugar industry. Tariffs and quotas on sugar have been in place in one form or another since 1789, when a host of protectionist measures were designed to support an infant nation’s industries. But the US is now the largest economy and the fifth largest sugar producer in the world, and those programs are being targeted.

The Trans Pacific Partnership is a 12-nation trade pact that seeks to lower trade barriers on many products produced and consumed around the Pacific Rim. Agricultural subsidies are a big part of this deal. Often, concentrated interests are able to secure government support at the expense of consumers, who don’t notice paying a few extra cents per pound. But trade agreements can open up new markets, and those protections become bargaining chips.

There’s no question that our sugar policy has worked. Domestic prices for raw sugar have been consistently higher than world prices for decades.

Source: USDA

In fact, it’s possible that artificially high sugar prices have induced food companies to use high fructose corn syrup as a cheaper substitute. Some studies have linked the rising use of these substitutes to increased rates of diabetes, although that research is not definitive.

Still, if a global trade pact can induce us to end two centuries of policies that fleece American consumers and can potentially improve our health in the bargain, that seems like a sweet deal.

Douglas R. Tengdin, CFA

Chief Investment Officer

By | 2017-07-17T12:22:41+00:00 July 30th, 2015|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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