Brazilian Sugarcane Industry Association Says Lame-Duck Congress Goes from Bad to Worse on Ethanol Policy

WASHINGTON, Dec. 3, 2010 /PRNewswire/ -- The Brazilian Sugarcane Industry Association (UNICA) issued the following statement in response to an ethanol proposal floated by Senator Max Baucus, chairman of the Finance Committee. The draft legislation would cut the U.S. ethanol subsidy (known as VEETC or the blenders' tax credit) from 45-cents per gallon to 36-cents per gallon, but extend the tariff on imported ethanol at its current rate of 54-cents per gallon -- doubling the effective trade barrier that benefits corn ethanol from nine to 18 cents.  This statement should be attributed to Joel Velasco, UNICA's Chief Representative in North America.

Despite calls from across the country to reform 30 years of U.S. ethanol policy, some in Congress are intent on making a bad situation even worse. Lame-duck lawmakers are pushing ahead with a plan to charge American taxpayers more than $5 billion per year to subsidize the mature corn ethanol industry, and increase a trade barrier that denies consumers choice at the pump.  These ethanol earmarks will make gas more expensive at a time struggling consumers are looking to Congress for relief.

The ethanol tariff and subsidies date back to the days of President Jimmy Carter, and the historical basis has always been clear: to offset the tax credit so that America does not subsidize foreign producers. Last month, a leading representative of U.S. ethanol producers underscored the rationale saying:

"We've always supported parity on the secondary tariff with the tax incentive. We think the only reason to have the secondary tariff is to protect the taxpayer, not the industry."

- Bob Dinneen, President & CEO, Renewable Fuels Association on November 3, 2010

Now some in Congress are trying to change the rules by making the tariff a true trade barrier rather than a subsidy offset.  The corn lobby may cheer this increased trade protection, but the real losers are American drivers since the lack of competition will keep ethanol prices artificially high.  Importantly, such a blatant move by Congress to create further inequities will risk a trade war between the United States and its trade partners.

America's corn ethanol industry has blossomed into a thriving business with booming exports to other countries and now accounts for half of all ethanol produced around the globe.  Brazil is the world's second largest producer and the leader in sugarcane ethanol.  Brazil ended government subsidies for ethanol more than a decade ago and eliminated its import tariff early this year. America should do the same. As the world's top producers, the United States and Brazil need to lead by example in creating a free market for clean, renewable fuel.

Allowing sugarcane ethanol to compete fairly in the U.S. would save drivers money at the pump, cut dependence on Middle East oil and improve the environment.  So the best option for Americans is to let the ethanol tariff and subsidies expire as scheduled, because competition benefits consumers. But should Congress choose to continue the ethanol subsidy at a reduced rate instead of eliminating it altogether, we urge lawmakers to reduce the import tax as well and set it at the same amount as the revised blenders' credit.

The ethanol import tariff shouldn't exist at all.  But if it must, the tariff should be a direct offset of the tax credit that protects Americans from subsidizing foreign production, not a punitive trade barrier.

The Brazilian Sugarcane Industry Association (UNICA) is the leading trade association for the sugarcane industry in Brazil, representing nearly two-thirds of all sugarcane production and processing in the country. For further information, including history of the symmetry between the tax credit and tariff and an expanded list of statements from lawmakers and corn ethanol representatives supporting parity, please visit www.SweeterAlternative.com/parity.

SOURCE Brazilian Sugarcane Industry Association (UNICA)