Smith Urges Level Playing Field for U.S. Ethanol
Washington, D.C. – Congressman Adrian Smith (R-NE) and Congressman Darin LaHood (R-IL) led nearly 20 of their colleagues in writing to United States Trade Representative Robert Lighthizer, requesting he work to terminate Brazil's use of a trade rate quota (TRQ) on U.S ethanol. Currently, Brazil has a 20% tariff on out-of-quota imports of U.S. ethanol while Brazil enjoys nearly tariff-free access to the U.S. market. In the letter, Smith requested Brazil implement its previous zero-duty exemption for U.S. ethanol. Smith, a long-time champion of ethanol use, is a senior member of the Ways and Means Committee, which has jurisdiction over trade and is a member on the Biofuels Caucus.
"Demand for ethanol was at record highs before the pandemic and Nebraska greatly benefitted from this boom, and ensuring our products have a level playing field internationally will help us bounce back. I appreciate my colleagues are joining in this fight for fairness for the ethanol industry, and look forward to hearing from Ambassador Lighthizer on the path forward."
Full text of the letter:
Dear Ambassador Lighthizer,
As representatives of significant corn- and ethanol-producing districts that would greatly benefit from an equitable trade relationship with Brazil, we ask that creating a level playing field for U.S. ethanol be a high priority during bilateral trade negotiations. Specifically, we request that you urge your Brazilian counterparts to terminate the ethanol tariff rate quota (TRQ) and prohibitive 20% tariff on out-of-quota imports, and instead reinstate the zero-duty exemption for U.S. ethanol from Brazil's Common External Tariff that was in effect from 2012 to 2017.
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. In September 2017, Brazil unilaterally decided to increase tariffs on ethanol imports through its restrictive TRQ system. Last year, for example, Brazil set an import quota of 198 million imported ethanol gallons and implemented a 20% tariff on each gallon above that. 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.
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. For this strong partnership to continue, it is critical that U.S.-produced ethanol receive fair tariff treatment.
Brazil's inequitable treatment of U.S. ethanol creates economic strain throughout the U.S. ethanol industry, especially during a year in which COVID-19 is devastating fuel demand in our country. The United States, however, continues to provide ethanol imports from Brazil virtually tariff-free access to the U.S. market. Last year, the U.S. imported 250 million gallons worth $596 million. Brazil must end this unfairness by eliminating its TRQ.
We appreciate your efforts to seize this opportunity to strengthen and improve the U.S.-Brazil trade relationship and look forward to an ongoing dialogue with your office and the Administration as trade discussions between the United States and Brazil continue.
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