Fair trade should be U.S. priority

By Bob Dinneen | October 26, 2006
As a kid, negotiating baseball card trades was serious business. There was no way you were going to give away a prized player for anything less than another person's equally prized player. The notion that trade be fair was paramount.

In today's world of tariffs and free-trade-versus-fair-trade debates, many of those same rules learned as a kid trading baseball cards still apply. The difference now is that we are talking about American tax dollars, jobs and capital investmentnot Carl Yastrzemski.
As you are aware, oil companies receive a tax credit for each gallon of ethanol they use, whether foreign or domestic. That credit is 51 cents per gallon. Since imported ethanol qualifies for this tax credit, the United States has imposed an equivalent credit offset, sometimes called a secondary tariff, to prevent already subsidized foreign ethanol producers from having access to American taxpayer dollars. It really is as simple as that.

Some argue removing the credit offset will dramatically increase ethanol supplies domestically, lower ethanol prices and expand the total market for ethanol. Those assumptions simply are not true and ignore important realities about world ethanol production.
U.S. production is more than sufficient to meet our growing ethanol demand today and in the years to come. This year alone, the United States will produce nearly 5 billion gallons of ethanol, a 25 percent increase over 2005. The assumption that the United States market desperately needs more ethanol is simply untrue.

As history has proven, the credit offset has never been a barrier of entry for imported ethanol. Through July of this year alone, more than 160 million gallons of Brazilian ethanol paid the offset and entered the U.S. market. Total imports this year may exceed 400 million gallons from all sources. Clearly, the credit offset does not deter Brazilian producers or others from bringing ethanol to U.S. ports.

The idea of a fair trade is also critically important to consider. American ethanol producers should be allowed to compete on a level playing field. By removing the offset, we would be putting our producers at a disadvantage because other countries subsidize their ethanol production, have weaker environmental standards, employ questionable labor practices or any combination thereof.
The removal or alteration of the offset would send a chilling signal about our commitment to a strong ethanol industry here at home. It would cool the flow of investment capital coming into rural America, encourage that capital to look overseas and limit the number of new jobs created in struggling areas of the country.

As an industry, we need to let our elected officials know that forcing Americans to subsidize already supported foreign ethanol production and putting our growing industry at a disadvantage by removing the credit offset is wrong.
Let's not trade a Willie Mays for a Jose Canseco.