Biofuel groups seek government intervention on Brazil's ethanol tariff

Administration urged to engage Brazilian counterparts to revoke tariff rate quota or increase tariff-free quota levels.

September 7, 2017

4 Min Read
Biofuel groups seek government intervention on Brazil's ethanol tariff

Growth Energy, the Renewable Fuels Assn. (RFA) and the U.S. Grains Council (USGC) are calling on the U.S. government to develop an immediate response to Brazil’s newly implemented tariffs on U.S. ethanol imports -- a trade barrier that threatens more than $750 million in U.S. exports and American jobs.

On Aug. 23, 2017, Brazil’s Chamber of Foreign Trade imposed an immediate two-year tariff-rate quota (TRQ) system for ethanol imports. Under the TRQ, a 20% tariff will be applied to purchases from the U.S. after a 600 million-liter (158.5 million gal.) quota is met. Fuel ethanol exports to Brazil this year were at 1.17 billion liters (310 million gal.) through July, according to Census Bureau trade data.

The three organizations, which work jointly and with the U.S. Department of Agriculture to develop overseas markets for U.S. ethanol, are imploring the Administration to immediately engage their Brazilian counterparts on the future of trade relationships with regard to biofuels. The groups stated, “It is vital that the Administration take immediate action and consider all avenues to encourage Brazil to either revoke the TRQ or substantially increase the tariff-free quota level to better reflect the current ethanol market and trade realities.”

They said Brazil’s “tactics” are the latest step in a troubling global trend towards protectionist tariffs and other actions against the American biofuel industry. “As the largest ethanol export market for American producers, the impact of this economic attack is both damaging and thoroughly counterproductive. American jobs, farms and businesses are at risk; this cannot go unanswered,” they said.

As the two largest democracies and economies in the Western Hemisphere, Brazil and the U.S. share one of the world’s most important trade and economic relationships. However, this decision will not just hurt America’s ethanol industry, because ultimately, Brazil’s consumers will also pay the price as this will drive up their costs at the pump. The groups said the hope is that this decision will be reversed.

“Brazil’s action is a violation of our mutual, long-standing agreement to maintain open trade between our countries, and the United States should not take this lying down,” Growth Energy chief executive officer Emily Skor said.

“When faced with the consequences of their decisions and bad economics, countries are shifting the pain to the American corn farmer. Brazil’s actions undermine the zero-ethanol tariff arrangement between our two countries that has been in place for several years and that damage the potential cooperation between our two countries to expand global ethanol demand and trade. President (Donald) Trump has been a strong supporter of America’s biofuels producers, and decisive action to defend this crucial domestic industry will be a clear reminder of the Administration’s continued commitment to strengthen the American economy. With ethanol production remaining a significant market for American corn and America’s farmers facing low commodity prices, government inaction on this vital issue would signal a detrimental economic downturn,” Skor added.

"About a decade ago, the U.S. and Brazil put aside a long-standing dispute over trade policy and began a process of mutual trade barrier disarmament,” RFA president and CEO Bob Dinneen said. “In fact, U.S. policies like the (Renewable Fuel Standard) actually created additional opportunities that further incentivized the importation of Brazilian sugarcane ethanol. Both countries have benefited greatly from the free and fair trade that resulted from the elimination of arcane barriers, and the U.S. and Brazilian ethanol industries worked arm in arm to build a robust global market for renewable fuels. Unfortunately, Brazil’s recent protectionist actions are turning back the clock to an era of isolationism and inefficient global trade. In the end, Brazil’s new trade policy not only harms U.S. ethanol producers but also penalizes Brazilian consumers who will be forced to pay more for their fuel as a result of CAMEX’s (Brazil's Council of Ministers of the Foreign Trade Chamber) actions,” he stated.

“We are encouraging our leadership to take action that will get us working together again,” USGC president and CEO Tom Sleight said. “I look forward to the day we are back to working together on global markets rather than putting in place protectionist measures that will ultimately hurt the global industry and our collective ability to reap the benefits of biofuels.”

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