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US ethanol industry demand government respond to Brazilian import tariff

The Renewable Fuels Association (RFA), Growth Energy and the US Grains Council (USGC) are calling upon the US government to develop an immediate response to Brazil’s newly implemented tariffs on US ethanol imports, a trade barrier the trio says threatens over US$750 million in US exports and American jobs.

On August 23, 2017, Brazil’s Chamber of Foreign Trade (CAMEX) imposed an immediate two-year tariff-rate quota (TRQ) system for ethanol imports. Under the TRQ, a 20 percent tariff will be applied to purchases from the US after a 600 million-liter (158.5 million gallon) quota is met. This year US fuel ethanol exports to Brazil are at 1.17 billion liters (310 million gallons) through July, according to Census Bureau trade data.

In a joint statement, the three organizations, which work jointly and with the US Department of Agriculture (USDA) to develop overseas markets for US ethanol, are “imploring” the Administration to immediately engage their Brazilian counterparts on the “future of our relationships” with regard to biofuels. Furthermore, that 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.

Brazil’s action is a violation of our mutual, longstanding agreement to maintain open trade between our countries, and the United States should not take this lying down. 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 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, said Emily Skor, CEO, Growth Energy.

The trio note that Brazil’s tactics are the latest step in a “troubling global trend towards protectionist tariffs” and other actions against the US biofuels industry. Brazil is the largest ethanol export market for American producers and as such, the impact of this “economic attack” is both damaging and thoroughly counterproductive as the decision will not only hurt America’s ethanol industry, Brazil’s consumers will also pay the price as this will drive up their costs at the pump.

About a decade ago, the US and Brazil put aside a long-standing dispute over trade policy and began a process of mutual trade barrier disarmament. In fact, US policies like the RFS 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 US 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 US ethanol producers, but also penalizes Brazilian consumers who will be forced to pay more for their fuel as a result of CAMEX’s actions, said Bob Dinneen, President, and CEO, Renewable Fuels Association.

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