Brazil drops 20 percent ethanol tariff

By Holly Jessen | March 16, 2010
Posted April 6, 2010

The U.S. ethanol industry is continuing to call for an extension of this country's tariff on imported ethanol, following an announcement by the Brazilian government that it is eliminating its 20 percent tariff on imported ethanol. The Brazilian Chamber of Foreign Trade said the temporary reduction will become official this week and will remain at zero until the end of 2011.

Growth Energy and the Renewable Fuels Association, however, maintain that the U.S. tariff is needed. The U.S. secondary tariff on ethanol, of 54 cents per gallon, levied on all except Caribbean Basin Initiative countries, is due to expire at the end of 2010.

On the other hand, UNICA, the Brazilian Sugarcane Industry Association, called the Brazilian announcement a "major step forward in building a global biofuels marketplace." The organization continues to lobby hard for the U.S. to also drop its tariff on imported ethanol. "The question now is whether the U.S., as the world's number-one ethanol producer, will follow suit," said Joel Valasco, UNICA's chief representative for North America. "Consumers win when industries compete. Brazilian ethanol producers are willing to compete for consumers. What about American producers?"

Studies commissioned by Growth Energy and RFA came out in March, concluding that without a U.S. tariff on imported ethanol, Brazilian ethanol imports would climb, replacing domestically produced ethanol. One of those studies, conducted by the University of Missouri's Community Policy Analysis Center, projected that, if the tariff were not extended, within three years job losses would climb to more than 161,000 and the decline in economic activity would hit $36.7 billion.

Growth Energy said it would not support reducing the U.S. import tariff because it makes no sense to provide Brazilian ethanol access to subsidies from the U.S. government when it already gets subsidies from its own government. When Congress passed the 2007 Energy Independence and Security Act, it intended to make this country more energy independent, not addicted to foreign energy. "If we want to import something from Brazil it should be the same resolve to become energy independent," said Tom Bruis, CEO of Growth Energy. "Brazil wisely saw the importance of supporting and incentivizing their domestic ethanol industry and now they are energy exporters while the U.S. continues to rely heavily on foreign oil."

RFA is advocating a "constant and consistent trade and tax policy" that grows the domestic ethanol industry. The secondary tariff on ethanol hasn't stopped Brazilian ethanol from being imported here—hundreds of millions of gallons have been imported in the last few years, the association points out. What it does do, however, is keep America taxpayer money from subsidizing ethanol from Brazil. "Removing the tariff on imported ethanol is a solution in search of a problem," according to an RFA statement. "America should not seek to add a reliance on imported ethanol to our already disastrous reliance on costly foreign oil."