US Ethanol Groups Oppose Following Brazil's Move To Lift Tariff

Just because Brazil decided to lift import tariffs on foreign ethanol doesn't mean the U.S. should follow suit, groups representing U.S. ethanol producers said Tuesday.

If the U.S. were to weaken its 54-cent-per-gallon import tariff, it would allow foreign ethanol makers to benefit from U.S. subsidies--subsidies that U.S. producers need, according to the U.S. producer group Growth Energy.

"We would not support reducing the U.S. import tariff, despite whatever Brazil is temporarily doing, because Brazilian ethanol already enjoys generous subsidies from the Brazilian government, and to provide them access to additional subsidies from the U.S. government makes no sense," Growth Energy Chairman Tom Buis said Tuesday.

Over the years Brazil has built up its sugarcane-based ethanol industry to the point where it is an exporting nation with no need for imports, according to a spokesman for the Renewable Fuels Association, another U.S. producer group.

Brazil, which is the world's largest exporter of ethanol with 60% of the global market, often faces a number of hurdles in foreign markets such as the U.S. due to high tariffs blocking entry.

Brazil does, however, import some corn-based ethanol from the U.S., said Joel Velasco, chief representative in the U.S. for Brazil's Sugarcane Industry Association, or Unica.

Unica not only supports the Brazilian government's decision to lift the 20% tariff on foreign imports, Velasco said, but the group petitioned the government to do so.

Velasco said it was important for Brazil to lift the tariff because in order for Unica to "argue for open markets in the U.S., Brazil needs to practice the same thing. It's a principle issue."

U.S. lawmakers have often defended the U.S. tariff on ethanol imports by pointing to Brazil's tariff, Velasco said. Brazil's decision to lift its tariff should effectively take away that argument to maintain the U.S. tariff.

The U.S. tariff is set to expire at the end of 2010, but U.S. lawmakers like Reps. Earl Pomeroy (D., N.D.) and John Shimkus (R-Ill.) have already begun work on legislation to extend it for five years.

Source: CME Group