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RFA Challenges U.S./Brazil Council on Fair Trade Commitment

December 8, 2011

           

Washington – The Renewable Fuels Association (RFA) today wrote to the leadership of the U.S./Brazil Council and the U.S. Chamber of Commerce calling on them to denounce ethanol trade-distorting policies in Brazil.  In late November, the groups urged Congress to allow the U.S. secondary tariff on imported ethanol to expire as it is scheduled.  In addition to the inaccurate information about the U.S. and global ethanol market contained within, the letter also failed to address a number of policies in Brazil that are impeding U.S. ethanol exports to that nation.

“Please know that while we share your desire for the removal of trade-distorting practices between the U.S. and Brazil, we are very concerned about the Council’s singular and biased focus on U.S. ethanol policy, and its failure to address more timely recent trade-distorting practices engaged in by Brazil,” wrote RFA President and CEO Bob Dinneen.

Specifically, the RFA pointed out that the U.S. is now a major exporter of ethanol, sending nearly one billion of gallons to overseas markets including Brazil.  The reason for this growth has been U.S.-produced ethanol’s average $0.58 discount to Brazilian ethanol since July 2009 and the poor ethanol productivity of Brazilian sugar mills in recent months.  As such, the RFA expressed disappointment in the letter’s failure to address distorting trade policies in Brazil while inconsistently calling for fair trade.

In its letter, the RFA pointed out two very specific actions taken by Brazil that limit U.S. access to that market.

“First, Brazil has recently taken an action that has no other reasonable justification than to reduce the volume of U.S. exports of ethanol to Brazil.  Recently, the Brazil government reduced the volume of ethanol that can be blended in fuel from 25% to 20%.  As a result of this mandated reduction in blend volumes, U.S. exports of ethanol to Brazil are being dramatically reduced from levels that would have otherwise occurred had Brazil left the mandate at 25%,” the RFA pointed out.  The result has been an increase in Brazilian imports of dirtier, more expensive petroleum-based fuels.

“Second, while your letter to Congress is correct to state that Brazil’s 20% import tariff has been suspended, you fail to further explain that this suspension was only on a temporary basis.  While Brazil’s Chamber of Foreign Trade (CAMEX) did indeed reduce its tariff in April of 2010, the temporary suspension is scheduled to expire one day after the U.S. tariff is set to expire,” the RFA pointed out.  The RFA encourages these groups to urge the Brazilians to make their intentions known on this distorting practice.

The U.S. secondary tariff on imported ethanol is set to expire at the end of this year.  So, too, is the tax incentive for which the tariff was implemented to offset.  The RFA is not advocating for the extension of either one.  However, the RFA believes it would be smart trade policy for Congress to allow the U.S. Trade Representative the authority to negotiate away the U.S. secondary tariff in exchange for the removal of ethanol trade barriers in other nations, like those described above.

In conclusion, the RFA wrote, “If the U.S. Chamber’s Brazil U.S Council is truly concerned about removing barriers to trade between the two countries, it would certainly be better served by addressing barriers that exist on both sides of the trade relationship.  We would also expect the Council to issue the same missive to decision-makers in Brazil, and support the U.S. ethanol industry’s efforts to remove barriers to our exports.  Trade with Brazil must be free and fair.”