Brazilian trade policies hurting U.S. industry — biofuels group

Source: Amanda Peterka, E&E reporter • Posted: Wednesday, November 21, 2012

The Renewable Fuels Association is asking the Obama administration to press for a correction of Brazil’s “trade-distorting policies.”

In a letter to U.S. Trade Representative Ron Kirk, the trade group says Brazil’s decision last year to lower the amount of ethanol allowed in gasoline and the state of São Paulo’s 25 percent tariff on ethanol imports has hampered U.S. producers’ ability to export ethanol to Brazil.

Renewable Fuels Association President and CEO Bob Dinneen wrote that the policies have caused a precipitous drop in U.S. exports to Brazil. Last year, the United States exported 1.2 billion gallons of ethanol, with about a third going to Brazil. This year, that number is expected to drop to between 650 million and 750 million, with 15 percent, at most, going to Brazil.

“The impacts of Brazil’s trade-distorting policies are becoming ever more harmful as U.S. ethanol producers endure devastatingly bad economics exacerbated by a lack of markets,” Dinneen wrote in the letter Friday.

Last year, Brazil reduced the amount of ethanol allowed in gasoline from 25 percent to 18 percent on concerns of a poor sugar cane crop. Dinneen accused the Brazilian government of taking the action to artificially reduce demand for U.S. ethanol and free up Brazilian ethanol to be exported to the United States.

He also said that São Paulo’s decision to put a 25 percent tariff on all imports while waiving it for domestic products discriminates against U.S. ethanol. Because most ethanol trade in Brazil comes through the state of São Paulo, the tariff is an artificial barrier in violation of international trade agreements, Dinneen said.

“Without a more fair and free trade arrangement with between Brazil and the U.S. with respect to ethanol,” Dinneen wrote, “the U.S. industry will continue to suffer unnecessarily from artificial trade barriers erected to protect the Brazilian fuel market.”

Dinneen added that the U.S. government has gone through “great lengths” to encourage international trade in ethanol by eliminating the secondary tariff on imported ethanol and allowing sugar-cane ethanol imported from Brazil to count for credit in the United States’ renewable fuel standard.

In the letter, Dinneen requests a meeting with Kirk to discuss the association’s concerns and asks for “any possible assistance” that the Office of the U.S. Trade Representative could provide.

The association wrote to Kirk in October of last year and twice earlier this year requesting help with Brazil’s policies. In an email provided by a spokeswoman, Dinneen said that Kirk’s office has “responded constructively and we continue to work with them on these issues.”