Brazil does not see U.S. retaliation after end of tariff-free ethanol quota

Source: By Roberto Samora, Marcelo Teixeira and Stephanie Kelly, Reuters • Posted: Wednesday, December 16, 2020

SAO PAULO/NEW YORK (Reuters) – Brazil’s sugar and ethanol lobby group Unica said on Tuesday it does not expect the United States to retaliate after the Brazilian government did not renew a tariff-free ethanol import quota that was almost entirely used by U.S. producers.

The tariff-free ethanol import quota, for 187.5 million litters of ethanol, expired on Monday. A Brazilian government source said last week that talks between the two countries for the quota’s renewal did not progress.

“Brazil renewed the quota last time in the hope of a deal that could include sugar, which didn’t happen, so that is the end of it,” said Unica’s president, Evandro Gussi.

Asked during an online news conference if he feared Washington would retaliate by limiting U.S. imports of Brazilian sugar, Gussi said he sees no reason for that.

Brazil has a share of a reduced-tariff quota to export sugar to the United States. That share was increased recently to 310,000 tonnes while the countries were holding talks for a trade deal for the sector.

The amount is small compared to overall Brazilian sugar imports of 30 million tonnes per year.

Without the ethanol quota, any U.S. export of the fuel to Brazil would pay a tariff of 20%.

There were no comments yet from both governments regarding the issue.

“Everything I hear is very negative, but I haven’t heard it from the horse’s mouth, yet,” U.S. Senator Chuck Grassley of Iowa said on Tuesday, commenting on whether a deal with Brazil would be announced.

Geoff Cooper, head of U.S. ethanol industry group RFA, said he had been informed that talks continue.

“We hope a deal can be reached. We have made it crystal clear to everyone that a 20% tariff would be devastating for the U.S. ethanol industry,” he said.

Unica’s Gussi believes political change in the United States, where Joe Biden will take over from Donald Trump as president next month, will make it harder to reach a deal, saying Democrats are usually more protectionists than Republicans.

Reporting by Roberto Samora, Marcelo Teixeira and Stephanie Kelly; Editing by David Gregorio and Timothy Heritage