As U.S. and Brazilian negotiators rush to solve a longstanding trade dispute over ethanol, U.S. lawmakers are weighing in to press for a resolution that eliminates Brazilian tariffs.
“Brazil’s inequitable treatment of U.S. ethanol creates economic strain throughout the U.S. ethanol industry, especially during a year in which COVID-19 is devastating fuel demand in our country,” say 20 Republican and Democratic lawmakers in a letter they sent Thursday to U.S. Trade Representative Robert Lighthizer. “The United States, however, continues to provide ethanol imports from Brazil virtually tariff-free access to the U.S. market.”
Brazil maintains a 20% tariff on U.S. ethanol, but the country also provides a tariff rate quota that allows the first 198 million gallons of U.S. ethanol to enter the Brazilian market tariff-free.
But the TRQ expires Aug. 31 and what happens next is still unclear. Brazil’s sugarcane and ethanol producers are lobbying their government to do nothing, but U.S. corn farmers, ethanol producers and lawmakers are demanding Brazil scrap its TRQ and lift its 20% tariff on U.S. ethanol.
The lawmakers say they suspect Brazil will again extend the TRQ with no policy change.
Sources from the administrations of both Donald Trump and Jair Bolsonaro in Brazil tell Agri-Pulse that negotiators are working towards a deal.
“Unfortunately, Brazilian purchases are down 32% from their peak in 2018 and appear likely to decline again in 2020 as the prohibitive 20% duty continues to hinder U.S. ethanol’s economic value in the country,” said lawmakers such as Reps. Darin LaHood, R-Ill., Adrian Smith, R-Neb., Collin Peterson, D-Minn., and Cindy Axne, D-Iowa, in the letter. “For this strong partnership to continue, it is critical that U.S.-produced ethanol receive fair tariff treatment.”
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The U.S. exported about 500 million gallons of ethanol in 2018, but that dropped sharply by more than 30% to just 340 million gallons in 2019, according to data from the U.S. Energy Information Administration.
“What we’re going to continue to do is press on USTR and USDA,” Craig Willis, senior vice president for global markets for Growth Energy, told Agri-Pulse in a recent interview. “This is our largest export destination for U.S. ethanol. Our ask is that we go back to where we were (when) there was no tariff on U.S. ethanol.”
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