US group says Brazil ethanol trade policy distorted

20 November 2012 21:11  [Source: ICIS news]

HOUSTON (ICIS)--A US ethanol group on Tuesday called on the US government for help in removing what it claims are "trade distorting policies" in Brazil that the group says have contributed to a decline in exports of US ethanol to that country.

The Renewable Fuels Association (RFA) sent a letter to US Trade Ambassador Ron Kirk asking for assistance in pushing Brazil to reverse an August 2011 decision to reduce its minimum ethanol blending requirement in gasoline to 18% from 25%.

The reduction is intended to artificially cut demand for imported ethanol while it frees up Brazilian ethanol that can be exported to the US, the RFA said.

The group also asked the US for help in removing a 25% tariff imposed by the state of Sao Paulo on ethanol imports.

Sao Paulo is Brazil's most populous state and the largest consumer of motor fuel in the country.

The tariff discriminates against US ethanol because it is only applied to imports and not domestic product coming to Sao Paulo from other regions, the US group said.

While imports of ethanol from Brazil continue to flow into the US at the rate of 50-60m gal/month, US ethanol exports to Brazil have been reduced significantly as a result of these trade barriers, the RFA said.

The US and Brazil have clashed over ethanol trade policy before.

Brazil for years fought the US over a 54 cent/gal tariff the US imposed on imported ethanol, saying the restriction was unfair because it hurt the competitiveness of Brazilian ethanol in the US market.

The US tariff was eliminated at the end of 2011.

Brazil also use to impose its own tariff on ethanol imports, but the 20% restriction was eliminated in 2010, a move that a Brazilian ethanol group at the time deemed a step towards a global biofuels marketplace.

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By: William Lemos
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