Lugar Calls for Elimination of 54-Cent Ethanol Import Duty

July 2, 2008 07:00 PM

via a special arrangement with Informa Economics, Inc.

Sen. Lugar provides food policy suggestions for G8 summit

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.

Sen. Dick Lugar (R-Ind.) called for the elimination of the 54-cent-per-gallon tax on imported ethanol to ease corn demand. "To demonstrate leadership," he said, "the United States should lift its tariff on Brazilian ethanol that now shelters the U.S. industry."

Lugar said eliminating the tariff would provide more competition and a better biofuels market in the long term. "Brazil can provide ethanol to our coasts more efficiently than from our 15-state heartland," Lugar said. "It is expected that the food crisis will endure a number of years and could have lasting effects. A situation of such long duration threatens to reverse any positive trends in the alleviation of poverty and improvements in health," Lugar noted.

Lugar is getting help for his ethanol import duty proposal from the Brazilian Sugarcane Industry Association (UNICA), which is launching an ad campaign this week called "Are We There Yet?" The ad, which will run this weekend in California, Florida and Washington, D.C., notes that “With millions of Americans expected to gas-up and head out for the July 4th weekend, producers of sugarcane ethanol want drivers to know that there is an alternative to continued increases in fuel prices.” The “Are We There Yet?” campaign will introduce Americans to a lower-cost, higher efficiency fuel, ethanol derived from sugarcane and call on the U.S. Congress to lift the tariff “that artificially inflates the price of cane ethanol.”

“Americans are being denied an opportunity to save money at the pump,” said Joel Velasco, Chief Representative for UNICA. “Eliminating, or even reducing the tariff on cane ethanol could provide immediate relief, particularly in states like California and Florida where this form of fuel is already in use.”

The group said that the U.S. tariff on imported ethanol was put in place in 1980 as a temporary measure designed to promote the market for domestically-produced ethanol. The tariff has been repeatedly extended, most recently in the 2008 Farm Bill, signed into law on June 14, 2008. Rep. Mark Udall (D-Colo.) introduced legislation on June 19 to facilitate the importation of ethanol by lowering the ethanol tariff. Sens. Dianne Feinstein (D-Calif.) and Judd Gregg (R-N.H.) previously introduced legislation on June 4 to reduce the tariff on imported ethanol.

Meanwhile, Lugar released a framework for leaders from the G8 countries, who will meet in Japan July 7-9 that he believes will promote global food security as prices for staple food commodities soar. He said the G8 should double agriculture investments in developing countries to help the poor produce more. “As we respond to the current food crisis with emergency assistance, we should recognize that this is more than a short-lived confluence of single events," Lugar told a conference held by the American Enterprise Institute. "Developing more advanced and locally appropriate farming technologies is essential to increase farm yields," he said.

"We do have the intellectual ability, the scientific ability to produce a whole lot more," Lugar said. "The question will be do we have the political skills."

Lugar also called for a phasing out of subsidies and trade barriers to give developing nations equal footing in global trade – an issue stalling an agreement in the Doha Round.

Lugar's "Global Food Security: An Agenda for the G8 Summit," outlines the necessary steps the international community must take to respond to the current food crisis. Highlights from his suggestions include:

Improve the International Response to Crises
-- Reconstitute the Food Aid Convention
-- Create a system of regionally placed supplies of food stocks
Commit to Invest in Rural Development and Agricultural Productivity
--Increase official development assistance for agricultural productivity and rural development
-- Increase funding for research and technology
-- Establish a global network of land grant colleges
Facilitate a Trade System that is Efficient, Fair, and Transparent
-- Encourage a conclusion of the Doha Development Round
-- Advocate increased research on genetically modified seeds appropriate to local needs
-- Endorse greater transparency and information sharing in the futures markets
Endorse Policies that Stabilize Energy Markets and Promote Alternative Fuel Sources
-- Encourage the opening of global energy markets
-- Commit to increase assistance for renewable energy
-- Endorse a multilateral Clean Technology Fund

Lugar said, "The cause of the current spike in food prices is a complex web of factors, some that have developed recently – a rapid increase in oil prices, droughts in some key exporting countries, and a weak U.S. dollar. Other factors have long been present – a significant under-investment in agricultural productivity and rural economies in the developing world, increased demand in emerging economies, an irrational avoidance of genetically modified crops that could markedly help poor small scale farmers to increase their yields, and a global trading system that too often inhibits the movement of food and the ability of farmers in poor nations to market their crops globally," Sen. Lugar said.

Meanwhile, the Environmental Protection Agency (EPA) continues to review a request from Texas Republican Gov. Rick Perry to partially waive the Renewable Fuels Standard (RFS) mandate. The EPA "will review the letter and respond appropriately," said agency spokesman Jonathan Shradar in an e-mail to Bloomberg News. "Keep in mind this is from the same Congress" that just months ago passed requirements that 9 billion gallons of grain-derived ethanol be blended into U.S. fuel this year, he added.

The EPA can grant a full or partial waiver if implementation is found to cause severe harm to the economy or environment of a state, region or the country. The agency must make a decision by late July on the request to waive 50 percent of the use requirement for this year. The 30-day comment period to respond to the wavier request ended June 23. The EPA will consider the comments and issue a response late this month.

While Sen. Lugar supports changes for the ethanol import tariff, he still favors the RFS mandate and blender tax credit of 51 cents per gallon, scheduled to go to 45 cents in Jan. 2009. While some groups and Texas Gov. Perry have called for a RFS mandate scale back, Lugar said, "I wish they would get over it, but some people haven't.”

NOTE: This column is copyrighted material, therefore reproduction or retransmission is prohibited under U.S. copyright laws.


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