RFA, Growth Energy, USGC urge suspension of Brazil’s GSP status

By Erin Voegele | November 14, 2017

The Renewable Fuels Association, Growth Energy and U.S. Grains Council are asking U.S. Trade Representative Robert Lighthizer to suspend Brazil’s designated country status under the Generalized System of Preferences.

The three groups send a letter to Lighthizer on Nov. 9, informing him of their intent to petition for the suspension of Brazil’s designated country status under the GSP, a preferential tariff system that eliminates duties on thousands of products when imported from one of 120 designated beneficiary countries and territories.

“Given their protectionist and market distorting actions in implementing a tariff rate quota (TRQ) that effects imports of U.S. ethanol, and pursuant to their obligations under 19 U.S. Code 2462, we believe that Brazil is no longer eligible for GSP trade benefits,” the groups wrote.

The RFA, Growth Energy and USGC explain that as part of the TRQ, a two-tear tariff of 20 percent will be assessed to all current and future imports of ethanol exceeding a 600 million-liter (158.5 million gallon) quota. The letter notes that this action occurred even though Brazil and the U.S. agreed to zero-duty tariffs for ethanol beginning in 2010.

According to the letter, the U.S. and Brazil generally serve as top customers for each other’s export exports. During marketing year 2016/2017, Brazil was the top export market for U.S. ethanol, accounting for nearly 500 gallons of U.S. ethanol. The letter also points out that Brazil has reached an ethanol trade surplus with the U.S. in eight of the past 10 calendar years.

The letter notes that Brazil exported $26.2 billion in goods to the U.S. in 2016, including approximately $3.3 billion in agricultural products. The U.S. had a $2.76 billion trade deficit with Brazil last year for agricultural products and ethanol. “Despite this uneven trade relationship, the United States agricultural sector has seen Brazil as an important trading partner and valuable market for its goods and services, and as such, encouraged the designation of Brazil as a GSP country,” the groups wrote. “Because of this designation, Brazil has become the third largest beneficiary of the program at $2.2 billion worth of GSP eligible trade in 2016.”

“White the current Brazil TRQ is consistent with the MERCOSUR external tariff of 20 percent, the protectionist measures by which it was implemented precludes it from fulfilling GSP country practices under 19 U.S. Code 2462,” wrote the RFA, Growth Energy and USGC. “As the United States represents over 99 percent of ethanol exports to Brazil, the TRQ effectively only applies to imports of U.S. ethanol. Our industry has been unfairly targeted as a result and placed at a position of competitive disadvantage. Therefore, Brazil’s decision to engage in protectionist trade measures as a result of a short-term and market-oriented deficit against the largest agriculturally related product imported from the U.S. is not in keeping with the spirit of the GSP program.”

As Brazil is in violation of providing “equitable and reasonable access to markets” as required by the GSP code, the RFA, Growth Energy and USGC have requested that the country’s status as a GSP country be suspended until it is in full compliance with 19 U.S. Code 2462.