Renewable fuels group escalates ethanol dispute

The Renewable Fuels Association has asked U.S. Trade Representative Ron Kirk for help in removing trade barriers it claims make it hard to export ethanol to Brazil.

“The impacts of Brazil’s trade-distorting policies are becoming ever more harmful as U.S. ethanol producers endure devastatingly bad economics exacerbated by a lack of markets,” association president Bob Dinneen wrote in a letter to Kirk.

The letter was Dinneen’s fourth to Kirk in the past year, asking Kirk to investigate the Brazilian state of Sao Paulo — the main port of entry for U.S. ethanol — for imposing a 25 percent tax on all imported ethanol, as well as Brazil’s decision in the summer of 2011 to reduce the percentage of ethanol in its gasoline blends from 25 percent to 18 percent.

“These barriers to trade with Brazil are even more confounding given the great lengths the U.S. government has taken to encourage international trade in ethanol,” Dinneen wrote.

The United States ended its secondary tariff on imported ethanol at the end of 2011, along with a tax credit for ethanol blenders. Treating sugarcane ethanol — produced by Brazil — as an advanced biofuel under the Renewable Fuel Standard “significantly” encourages increased imports from Brazil at the expense of domestically produced corn-based ethanol, according to Dinneen.

He charges in the letter that Brazil reduced the percentage of ethanol required in gasoline blends there in order to make more sugarcane-based ethanol available for export to the United States.

The United States imported slightly more than 100 million gallons of Brazilian ethanol in August, and nearly 92 million gallons in September, according to Dinneen.

That’s equal to the annual production from three average-sized U.S. corn ethanol plants, he said.

The U.S. ethanol industry exported nearly 1.2 billion gallons in 2011, one-third of that to Brazil, Dinneen wrote. But most analysts expect 2012 exports to reach no more than 750 million gallons, with only between 10 percent and 15 percent going to Brazil, he said.

“Without a more fair and free trade arrangement … the U.S. industry will continue to suffer unnecessarily from artificial barriers erected to protect the Brazilian fuel market,” he wrote.

Nkenge Harmon, a spokeswoman for Kirk, said his office is reviewing the letter.