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Sugarcane Ethanol Producers Respond to Unfair Legislation to Extend Tariff

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In response to the introduction of H.R. 3552, legislation sponsored by four members of the U.S. House of Representatives to extend the import tax on foreign ethanol, the Brazilian Sugarcane Industry Association (UNICA) issued the following statement.  It should be attributed to Leticia Phillips, UNICA’s Representative in North America.

The United States has been subsidizing corn ethanol and imposing trade barriers on cleaner, cheaper ethanol from other countries for more than 30 years.  The stated rationale for the ethanol import tariff has always been to offset a tax credit intended for corn ethanol producers and therefore prevent Americans from subsidizing foreign energy production. This corn ethanol credit expires at the end of December, as should the justification for maintaining the corresponding ethanol import tax.  According to a letter from the U.S. Chamber of Commerce sent to Congress last week:

“These trade barriers prevent U.S. consumers from abundant and potentially more economical choices from friendly nations like Brazil…The elimination of the import tariff on foreign ethanol would create an open, competitive marketplace resulting in more choices for consumers, less global fuel price volatility, and perhaps most importantly, increased savings at the gas pump for U.S. drivers.”

However, certain parties who benefit from the current, anti-competitive arrangement and their allies in Congress are trying to change the rules by making the tariff a true trade barrier rather than a subsidy offset.  Special interests may cheer this increased trade protection, but the real losers are American drivers since the lack of competition will keep ethanol prices artificially high.  Such a blatant move to create further inequities will also risk a trade war between the United States and its trade partners, including friendly nations like Brazil.

America’s corn ethanol industry has blossomed into a thriving business.  In fact, this year the United States solidified its new position as the world’s largest ethanol producer and exporter – shipping an estimated 900 million gallons around the globe.  Half of America's exported ethanol winds up in Brazil, where it enters that country without paying a tariff.  Brazil is the world’s second largest producer and the leader in sugarcane ethanol.

Brazil ended government subsidies for ethanol more than a decade ago and eliminated its import tariff on American ethanol in 2010. America should do the same. The U.S. Senate agrees and has made its position on the ethanol tariff and tax subsidy crystal clear by voting in a strongly bipartisan way to end both the tariff and tax credit earlier this year (73-27). We commend Senators Coburn and Feinstein for their leadership to end the tariff and tax credit.   In addition, Congressmen Joe Crowley and Wally Herger have introduced a similar proposal in the House Ways and Means Committee (HR 2307) that would allow for cheaper and cleaner sugarcane ethanol to be available to U.S. consumers.  This bill also enjoys strong bipartisan support.

As the world’s top producers, the United States and Brazil need to lead by example in creating a free market for clean, renewable fuel.  That means putting an end to trade distorting tariffs on ethanol.

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Ana Carolina Lessa
Public Affairs, North America
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copyright 2010 Brazilian Sugarcane Industry Association