Case Number: 5-204-255, Year Published: 2004
HBS Number: KEL001
International Trade, Quotas, Government Interventions, Welfare, Consumer and Producer Surplus
Since 1981, the U.S. federal government has operated a price support program to help sugar beet and sugar cane producers and processors. This complex program works through a combination of loans, import quotas, and duties. As a result, sugar prices in the United States are significantly higher than world prices. For example, in December 2001, U.S. consumers paid 22.9 cents per pound, while the world price was just 9 cents per pound. The General Accounting Office estimates that the total cost to consumers is $1.9 billion a year. This case uses a simple demand-and-supply framework, using real-world data, to assess the economic and political consequences of the U.S. sugar program. The case provides students with a vivid, fact-based illustration of welfare concepts such as consumer surplus, producer surplus, and dead-weight loss in a concrete, real-world market context.
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