A group of federal lawmakers is asking United States' lead trade representative to push Brazil to either eliminate its ethanol-import tariffs or face retaliation, in a letter sent to U.S. Trade Representative Robert Lighthizer on Thursday.
Time is running out on Brazil's current ethanol tariff on some U.S. ethanol imports and there is a pending threat to set a new tariff on all of those imports.
President Donald Trump said during a news conference on Aug. 10, his administration is considering a reciprocal tariff against Brazil.
In response to a reporter's question Trump said, "As far as Brazil is concerned, if they do tariffs, we have to have an equalization of tariffs. You may be seeing something on that very soon."
Brazil's current tariff rate quota is set to expire at the end of August. Brazilian ethanol industry and government officials have suggested slapping a 20% tariff on all U.S. ethanol imports starting in September.
U.S. ethanol exports to Brazil have fallen as a result of the tariff rate quota and over-quota tariff. Those exports dropped by about 33% from 2018 to 2019. The Renewable Fuels Association said those shipments continue to fall in 2020, and U.S. producers have lost about 350 million gallons of demand for ethanol since late 2017, valued at about $400 million.
In a letter to Lighthizer on Thursday, House lawmakers asked him to push Brazil to drop the tariff altogether.
"Although our countries maintained a reciprocal policy of applying low or zero duties on ethanol imports for nearly a decade, in recent years, Brazil has increasingly implemented protectionist trade policies towards the U.S. ethanol industry," the lawmakers said.
Brazil decided to increase tariffs in September 2017, on ethanol imports.
Last year, Brazil set an import quota of 198 million imported ethanol gallons and a 20% tariff on each additional gallon.
"Despite initial claims that the TRQ would be in place only for two years, the Brazilian government extended the policy by another year, and we have reason to suspect that this will once again be extended at the end of this month," the lawmakers said.
"Ethanol is foundational to the trade relationship with Brazil and accounts for nearly half of all U.S. agricultural exports to the country. Brazil was the largest U.S. ethanol export market last year, purchasing 332 million gallons of U.S.-produced ethanol worth $493 million. This economic activity is injected directly back into the communities we serve in the form of employee wages, feedstock payments to farmers, and continued investments in our ethanol facilities. 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."
The lawmakers said despite Brazil's actions, the U.S. continues to allow Brazilian imports nearly tariff-free access.
The letter is signed by Reps. Darin LaHood, R-Illinois; Adrian Smith, R-Nebraska; Rodney Davis, R-Illinois; Roger Marshall, R-Kansas; Jim Hagedorn, R-Minnesota; Dusty Johnson, R-South Dakota; Cindy Axne, D-Iowa; Cheri Bustos, D-Illinois; Don Bacon, R-Nebraska; Mike Bost, R-Illinois; Vicky Hartzler, R-Missouri; Pete Stauber, R-Minnesota; Jeff Fortenberry, R-Nebraska; Ron Estes, R-Kansas; Collin C. Peterson, D-Minnesota; Adam Kinzinger, R-Illinois; James R. Baird, R-Indiana; Dave Loebsack, D-Iowa; John Shimkus, R-Illinois; Tom Emmer, R-Minnesota.
RFA President and Chief Executive Officer Geoff Cooper said in a statement momentum seems to be building toward normalizing ethanol trade with Brazil.
"Clearly, there is consensus building that something must be done immediately to prevent Brazil from doubling down on its protectionist ethanol trade policies," Cooper said.
"The chorus of voices is growing louder: it's time for Brazil to remove its punitive trade barriers and honor its commitment to free and fair trade. Otherwise, the United States may have no choice but to respond in kind and take action to shut out imports of Brazilian ethanol."
Todd Neeley can be reached at email@example.com
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