FocusCorrected: Brazil trade group attacks US ethanol tariff, seeks WTO action

07 December 2010 22:00  [Source: ICIS news]

Correction: In the ICIS news story headlined "Brazil trade group attacks US ethanol tariff, seeks WTO action" dated 7 December 2010, please read in the seventh paragraph …Saturday… instead of …Friday…. A corrected story follows.

By William Lemos

HOUSTON (ICIS)--Brazilian ethanol group Unica on Tuesday vowed it would urge the Brazilian government to seek World Trade Organization (WTO) intervention should the US extend its 54-cent/gal tariff on imported ethanol.

“We will have exhausted all options to resolve our differences through informal dialogue and the US legislative process,” said Unica President Marcos Jank, referring to a possible extension.

It would then be time for the WTO to resolve this matter in accordance with applicable international laws, he said.

The Brazilian group decried what it called “ongoing negotiations” in the Congress that would keep the import tariff in place, but reduce a 45-cent/gal tax credit the US gives for blending ethanol in gasoline.

According to Unica, the White House and Congressional leaders were negotiating a deal to reduce the subsidy, known as VEETC, to 36 cents/gal while leaving the tariff unchanged at 54 cents/gal (€41 cents/gal).

The blender credit, the tariff and other subsidies given to the US ethanol industry will expire at the end of the year unless Congress renews them.

A proposal to reduce the VEETC to 36 cents/lb was rejected by the Senate on Saturday, but the Renewable Fuels Association (RFA), a key US ethanol industry group, appeared confident the legislation would eventually move forward.

“We remain confident that VEETC will be extended, if for no other reason than to prevent shedding thousands of jobs associated with domestic ethanol production,” the group said on its website.

US support for the ethanol industry, particularly the tariff, has always been a thorny issue between Unica and the RFA.

The US group claims the import barrier is needed to keep US taxpayers from subsidising foreign production of the biofuel.

But Unica has repeatedly rejected that claim, pointing to a 9-cent/gal difference between the tariff and the VEETC.

The Brazilian group is now lambasting the Obama administration for supporting an extension.

“Unfortunately, lame-duck legislation negotiated by the President and Congressional leaders is set to double the import tax… from nine to 18 cents/gal and transform the tariff from an offset to a punitive trade barrier,” the Brazilian group said.

The RFA rebuffed the latest charge by Unica, calling it a “desperate, last ditch effort to influence negotiations”.

The US group has in the past pointed the finger back at Unica, saying the Brazilian ethanol industry was also heavily subsidised and was now chasing a larger market.

“It is quite brazenly disingenuous for Unica to lecture Americans on our national ethanol policy,” an RFA official said in a blog posting on the group’s website dated 1 September.

The RFA claims the Brazilian government has had a far heavier hand in growing the ethanol industry in that country, citing subsidised loans, blends requirements and price control.

“Despite the millions they spent, Brazilians appear to have come up empty and rightfully so,” said RFA’s communications director Matt Hartwig.

($1 = €0.75)

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By: William Lemos
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