The price of the US’ sweet addiction to sugar farmers and the potential for further distorting the market for ethanol in the US is explored in a post over on the Politics of Food. Rachel C. Dechenne says in a post about the 2008 sugar program:
In June of this year, SUA and an alliance of 30 manufacturers including American Beverage Association, Kraft, Kellogg and ConAgra, Cadbury Schweppes, Coca Cola, General Mills, PepsiCo, GMA, Consumer Federation of America, Sweetener Users Association and US Chamber of Commerce, claimed that by imposing government-regulated price floors, marketing quotas and import restrictions, domestic sugar prices are increased.
The group also warned that a proposal to divert surplus sugar to ethanol production would force the government to buy even more sugar from American producers and then sell it at a loss to ethanol plants, with taxpayers picking up the difference.
That would be good news for companies operating in the sugar to ethanol sector but pretty bad for everyone else. The subsidised sugar would be turned into ethanol, which is further subsidised by tax breaks. You can see where this is going. The difficulty is that these are hidden costs and would be spread thinly over a large part of the economy. You can imagine the row that would ensue should the US government try to do something about it by letting the market operate without barriers or subsidies. We’ve managed reforms of a kind to our sugar regime in Europe, albeit limited and short of where they should be. But the US won’t be able to touch Sugar until 2012. That might be a conversation that the WTO could have with Bush’s successor.