About 90 percent of the world s candy canes are consumed in the United States, and until recently most were produced domestically. Domestic producers were closer to consumers, so they had lower transportation costs and lower prices than their foreign competitors. Domestic firms used their superior access to consumers to dominate the market.
In recent years, the domestic production of candy canes has decreased. In 2003, Spangler Candy Company of Bryan, Ohio, shifted half its production to a plant in Juarez, Mexico. The company opened the Mexico plant because the cost of sugar, the key ingredient in candy, is only $0.06 per pound in Mexico, compared to $0.21 in the United States. The shift to Mexico saves the firm about $2.7 million per year on sugar costs. The high price of sugar has caused other candy manufacturers to shift their operations overseas. Since 1998, the Chicago area, the center of the U.S. confection industry, has lost about 3,000 candy-production jobs.
Why is the price of sugar in the United States so high? The government protects the domestic sugar industry from foreign competition by restricting sugar imports. As a result, the supply of sugar in the United States is artificially low and the price is artificially high. In this case, the protection of jobs in one domestic industry reduces jobs in another domestic industry.