Brazil 's Foreign Trade Council has suspended temporarily a 20 percent tariff on ethanol imports through the end of 2011, the council said in a statement, adding that it was taking the action in an effort "to be consistent with Brazilian demands to eliminate tariff and non-tariff barriers against ethanol in markets worldwide."
Brazil is the world's largest exporter of ethanol, with overseas sales in March at 68 million liters (nearly 18 million gallons). However, Brazil has run into obstacles in a number of foreign markets, especially the United States , because of high tariffs and other barriers blocking entry of Brazilian ethanol.
Brazil 's government has sought to dismantle such barriers based on the argument that ethanol is a clean-burning fuel and should be increasingly used as a substitute for highly polluting fossil fuels.
Brazil 's decision to eliminate its 20 percent tariff on imported ethanol through 2011 "undermines its claims for wanting a global trade in ethanol," says the U.S. Renewable Fuels Association. "Vacillating regulations regarding Brazil's trade policy as well its domestic consumption of ethanol make it impossible for foreign ethanol producers to even consider exporting product into Brazilian markets," the organization said in a statement.
" America should continue a constant and consistent trade and tax policy that provides for the growth of the domestic industry while not penalizing imports should the market demand them," says RFA. The organization defends the U.S. 54-cent-per-gallon ethanol tariff by saying that it "serves to protect American taxpayers from further subsidizing foreign ethanol industries already benefiting from generous government support in their own countries."
RFA worries that removing the U.S. ethanol tariff would lead to the country becoming reliant on imported ethanol similar to the current U.S. "disastrous reliance on costly foreign oil."
Meanwhile, U.S. ethanol producer group Growth Energy said just because Brazil decided to lift import tariffs on foreign ethanol doesn't mean the United States should follow suit. If the United States were to lower its 54-cent-per-gallon import tariff, it would allow foreign ethanol makers to benefit from U.S. subsidies — subsidies that U.S. producers need, says the organization.
"We would not support reducing the U.S. import tariff, despite whatever Brazil is temporarily doing, because Brazilian ethanol already enjoys generous subsidies from the Brazilian government, and to provide them access to additional subsidies from the U.S. government makes no sense," said Growth Energy Chairman Tom Buis.
Brazil 's Sugarcane Industry Association (UNICA) called the decision "a major step forward in building a global biofuels marketplace." UNICA would like for Brazil 's government to make the tariff reduction is permanent, "particularly should other countries, namely the United States , reduce their trade distorting tariffs on ethanol imports." And, says UNICA spokesman Joel Valasco, Brazil plans to step up its intense lobbying efforts against the U.S. tariff.
This will be a David-versus-Goliath battle against the U.S. farm lobby, which has a grip on Congress that is unparalleled, said Valasco. "We have a 50-50 chance of success," he said.
U.S. lawmakers have often defended the U.S. tariff on ethanol imports by pointing to Brazil 's tariff, Velasco said. Brazil 's decision to lift its tariff should effectively take away that argument to maintain the U.S. tariff, he added optimistically.
UNICA will try to reach out to U.S. groups ranging from environmentalists concerned about corn being used for biofuels rather than food to consumers who want better prices and more competition, he said.
If Congress doesn't renew the existing U.S. tariff, it will automatically expire at the end of this year. In the House, Reps. Earl Pomeroy (D-N.D.) and John Shimkus (R-Ill.) have introduced legislation (HR 4940) that would extend the tariff and blender credit for five years.
