Ethanol, Grain Groups Want Trump to be Tough on China

Source: By Todd Neeley, DTN/Progressive Farmer • Posted: Thursday, February 9, 2017

Two ethanol groups and a grain industry group asked President Donald Trump this week to do something about recent trade actions taken by China to restrict ethanol and dried distillers grains imported from the United States, in a letter to the president on Tuesday.

In a letter from Growth Energy, the Renewable Fuels Association and the U.S. Grains Council, the groups ask the president to put China’s actions at the top of a to-do list for the next U.S. trade representative.

“A consistent theme throughout your campaign was the risk to American workers and industries from unfair trade,” the letter said.

“That message resonated with the U.S. ethanol industry and farmers who depend on access to foreign markets to compete effectively. You cited China’s currency manipulation and unfair tariff and non-tariff barriers as particularly harmful to America’s economic interests. We can most definitely attest to the devastating effects of China’s capricious actions, and greatly appreciate your commitment to putting America first.”

The groups said China’s actions are “significantly injuring” U.S. ethanol producers and farmers, and “undermining the substantial investments our industries have made in developing a cooperative and mutually beneficial trade relationship with China.”

During the past 10 years the ethanol and corn industries have worked extensively to open Chinese markets.

The ethanol and agriculture trade relationship with China has been up and down for years.

China did not import DDG from the United States at all in 2006. By 2010, China emerged as the top export market for U.S. DDG. In 2015, China imported 6.5 million metric tons of U.S. DDG valued at about $1.6 billion.

China began importing U.S. ethanol in 2015 to reduce smog formation in cities like Beijing. Ethanol exports to China expanded in late 2015 and throughout 2016 when the country became the U.S. ethanol industry’s third-largest export market.

According to the groups nearly 200 million gallons of ethanol worth more than $300 million were shipped to China in 2016.

China’s recent actions, however, resulted in “sharply lower prices for both products and financial harm to U.S. ethanol producers and farmers,” the groups said in the letter.

In September 2016 China imposed a preliminary antidumping duty of 33.8% against U.S. DDG, as well as a countervailing duty of 10% to 10.7%.

“These duties were implemented despite the fact that China’s investigation did not find any evidence of dumping or injury to domestic industries,” the groups said.

“China’s imposition of duties on DDG raises important questions about whether the country violated its obligations under World Trade Organization (WTO) rules and ignored accepted protocols for investigations of alleged dumping.”

Those duties resulted in the rapid collapse of DDG exports to China, the groups said.

In 2015, prior to initiation of the Chinese antidumping investigation, DDG exports to China averaged 538,522 metric tons per month, according to the groups.

“By November 2016, exports to China had plummeted to 61,575 metric tons- a dramatic 89% reduction,” the letter said.

“In January 2017, with its final determination, China raised the antidumping duty rates on U.S. DDG in to a range of 42.2% to 53.7% and increased countervailing duty rates to 11.2% to 12%. Adding insult to injury, the Chinese have indiscriminately re-instituted a WTO illegal value-added tax on the import of U.S. DDG. Together, we expect these additional increases will substantially curtail DDG exports to China in 2017.”

At the start of 2017 the Chinese government announced it was taking punitive action against U.S. ethanol imports. “Effective Jan. 1, 2017, China has increased tariffs on U.S. ethanol from 5%, to 30% to 40%,” the groups said.

“As a result, it is being reported that Chinese buyers have cancelled orders for U.S. ethanol imports that were made prior to the tariff being raised. It is widely believed that raising these tariffs will put an immediate end to ethanol exports to China, erasing the significant progress our industry made in developing that market over the past several years.”

“…Thus, we respectfully ask that reform of these punitive ethanol tariff rates be included in any potential upcoming trade negotiations with China.”