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Bush Tells Brazil 'No' On Removing Ethanol Import Duty

President Bush tells Brazil: no change in U.S. tariff on imported ethanol. Brazil's president asked, and President Bush said no.

At a news briefing late last week in Sao Paulo, Brazil, Bush repeated that he is not going to call for the removal of the U.S. tariff on imported ethanol, a disappointment for the Brazilian government. "It's not going to happen," Bush said. "The [U.S.] law doesn't end until 2009. And the Congress will look at it when the law ends," Bush said. Several members of Congress had previously complained that any removal would be detrimental to the domestic ethanol industry.

Facts and figures. Imported ethanol is subject to a tariff of 54 cents per gallon in the U.S. Supporters say it offsets the tax credit of 51 cents per gallon that all ethanol producers receive, whether foreign or domestic. Foreign-made ethanol that is processed in the final stages, or dehydrated, in the Caribbean islands can enter the U.S. duty-free, up to 7 percent of the U.S. market.

A U.S.-Brazil renewable fuel agreement will advance biofuels development, but it does not include specific programs; nor does it mention how the financial costs will be shared. Bush administration officials left the details to future negotiations, after several members of Congress cautioned against taking any action that would be perceived as detrimental to the domestic ethanol industry.

A two-page memorandum of understanding, signed March 9 by Secretary of State Condoleezza Rice and Brazilian Foreign Minister Celso Amorim, pledges Brazil and the U.S. to work together on a "three-prong approach"--bilateral, regional, and multilateral--to advance biofuels. It says issues relating to domestic trade and tariffs between the two countries will be raised in other forums, which means the Doha Round of global trade talks.

The memorandum calls for a steering group to oversee the work under the direction of the State Department, with a similar group in Brazil.

The plan calls for Brazil and the U.S. to use current bilateral agreements to leverage work on next-generation biofuels technology; to expand the production and use of biofuels in Central America and the Caribbean; and to transform biofuels into a commodity that can be traded in the global marketplace by establishing uniform standards and codes.

The effort will be assisted by the new International Biofuels Forum, established March 2 by the United Nations, at the request of Brazil's president.

A connection to Bush's renewable fuel goal. The Bush administration sees the ethanol agreement not only as a way to shore up relations with Latin America, but to help meet the president's goal of reducing projected annual gasoline use by 20 percent in 2017. A total of 35 billion gallons of renewable fuels would be needed in 2017 to meet Bush's goal -- and sources say "a chunk of imported ethanol from Latin America" would help fulfill that target.