Brazil demands immediate, unconditional surrender from United States on ethanol tariff; links to climate change progess
December 13, 2007
In Indonesia, the Brazilian Foreign Minister, Celso Amorim, said that “if we want to be serious about climate change, trade barriers must be removed promptly and unconditionally.”
He added criticism of the United States for not signing the Kyoto Treaty.
President Bush affirmed in March that the tariff on Brazilian ethanol would remain in place until 2009.
Earlier this month, Brazil accused the United States and Europe of having a “biased and protectionist agenda” at the World Trade Organization. Brazil was criticizing a proposed compromise on commercial rules which it said are biased towards the US.
The offer from the US and the European Union was to exempt 43 “green products” from trade tariffs to stimulate use of climate-friendly products, but excluded ethanol and other goods primarily produced in Brazil.
Brazil is expected to ask the World Trade Organization to investigate U.S. ethanol subsidies. If the WTO takes on the case, it will be the first time the organization has ruled on energy subsidies.
The convergence of energy and agriculture in the biofuels industry is expected to pose thorny questions for the WTO if it takes on the case. While neither sector has enjoyed free trade conditions, the subsidy mechanism which has supported national agriculture interests has attracted negative attention far more than the cartel approach employed in the oil industry.
Brazilian ethanol exports fell to 60 million gallons in November 2007, a drop of 31 percent from October and a fall off of 17 million gallons, or 22 percent, compared to November 2006. Excess US ethanol supplies were blamed for the drop. In addition to falling export levels, prices also fell to $1.47 from $1.83 last year and $1.50 last month. Total export income from ethanol fell from $141 million to $86 million, a loss of $55 million or 39 percent.
Overall, Brazilian ethanol exports for 2007 will be 800 million gallons, down 20 percent from 2006 owing to oversupply in the US market.
Last month, Florida governor Charlie Crist said that he opposed the Brazilian ethanol tariff and would lobby the state’s Congressional delegation to reduce it. The 54 cent per gallon tariff is scheduled to expire in 2009, and Crist warned that it was unlikely that the tariff would be repealed in 2008 due to the US Presidential elections.
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