Employment Changes in US Food Manufacturing - Coalition for ...

Executive Summary
The Report of the House Appropriations Committee on H.R. 4754, the Commerce,
Justice, and State, the Judiciary, and related agencies appropriations bill for fiscal year
2005 (H.Report 108-576) directed the Secretary of Commerce "to report on whether jobs
in food manufacturing (including confectionery), cane refining and related industries
have been lost as a result of the movement of manufacturing facilities offshore due, in
material part, to the differential between U.S. and world sugar prices, and if applicable,
the report shall include an estimate of the number of jobs lost."
Supply and Demand
The United States used approximately 17.8 billion pounds of refined sugar in 2003, down
from 18.5 billion pounds in 1999. Approximately 85 percent of this sugar was produced
domestically and the remaining portion was imported. The three main sugar-consuming
product sectors are non-chocolate confectionery, chocolate and chocolate confectionery,
and breakfast cereal.
Several factors have contributed to the declining demand for U.S. refined sugar including
cost, confectionery plant closings and relocations abroad, higher refining costs for cane
versus beet sugar, greater use of other sweeteners and sugar substitutes, and increased
imports of sugar containing products (SCPs). Imports of SCPs have grown rapidly from
$6.7 billion in 1990, to $10.2 billion in 1997, up to $18.7 billion in 2004.
As U.S. sugar production continues to be protected, trade in sugar containing products
has been liberalized. The trade imbalance in SCPs increased nearly five-fold over 1997
to 2002 to $4.7 billion, while the sugar content in imported products has also risen. As a
result, foreign manufacturers' access to lower-priced sugar contributes to increased
imports and hinders U.S. manufacturers' abilities to compete both here and abroad.
Price
In general, the domestic price of U.S. wholesale refined sugar over the last 25 years has
been two to three times the world price. These higher prices are maintained through
support loans and tariff-rate quotas. In 2004, the U.S. price was 23.5 cents per pound,
compared to the world price at 10.9 cents. This price differential results in a significant
competitive cost disadvantage for domestic SCP manufacturers.
Plant Relocations
Many U.S. SCP manufacturers have closed or relocated to Canada where sugar prices
average less than half of U.S. prices, and Mexico where sugar prices average about twothirds
of U.S. prices. Other factors such as labor and health care costs also favor Canada
Employment Changes in U.S. Food Manufacturing: The Impact of Sugar Prices 3