By on December 9, 2010

Senate Democrats confirm that an extension of the full 45 cents/gal tax credit and 54 cents/gal import duty has been included in the Senate version of a Bush Tax Credit extension, prompting an angry response from the Brazilian sugar cane ethanol lobby. With Brazilian subsidies set to drop by nine cents per gallon, the Brazilian Sugarcane Industry Association (UNICA) claims that the American subsidy is no longer an “offset” but a full-fledged barrier to trade. UNICA’s President Marcos Jank tells

It is clear that the United States is not committed to open and fair trade in clean energy, particularly ethanol. We will have exhausted all options to resolve our differences through informal dialogue and the U.S. legislative process. It will then be time for the WTO to resolve this matter in accordance with applicable international rights and obligations.

Previously it was reported that the ethanol Blender’s Credit would be extended at a lower rate of 36 cents/gal, but with the tax credit extension debate snowballing into a lame duck slugfest, it seems that the subsidy extension was included to bring farm-state legislators on board. In addition to pissing off the Brazilians and possibly sparking a WTO battle, a full five-year extension of ethanol subsidies and tariffs at the current rate will cost the government no less than $31b. But don’t start planting corn yet… House Democrats seem set on scuppering the Senate’s tax credit extension deal (even though they support the ethanol extension). If they keep anything from passing during the lame duck session, the subsidies will expire completely, forcing the industry to champion new legislation. The battle rages on…

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23 Comments on “Brazil Threatens Trade War As Senate Moves To Approve Ethanol Subsidy Extension...”

  • avatar

    “If they keep anything from passing during the lame duck session, the subsidies will expire completely, forcing the industry to champion new legislation.”

    With Iowa still the first stop on the presidential primary train, does anyone think that renewed subsidies or (worse yet) new subsidies are not inevitable?

    • 0 avatar

      The real question is “where is the tipping point between environmentalism and pandering?”
      And I mean environmentalism in terms of a president who’s got the balls to admit corn-based ethanol (E85 and E10 both) are far more pork than any kind of long-term fuel solution.

  • avatar

    It would be nice if the Democrats would extend a few tax credits to individuals paying income taxes, instead of agri-business concerns.  But then that would mean that they actually care about individuals, and individuals can’t lobby (and contribute) quite as easily as Archer Daniels.  And god forbid that the market be allowed to set demand for this questionable product.

    • 0 avatar

      The Republicans could stand up to ADM as well. They’ve demonstrated remarkable solidarity in demanding the maintenance of lower tax rates for the wealthiest Americans. I would believe in them if they would show that same solidarity when standing up to ADM.

    • 0 avatar

      Agreed.  Both sides of the aisle know where the contributions are coming from.

  • avatar

    There’s still hope, but we may have to wait a while to get rid of ethanol. The central problem is that the Tea Party and its supporters were not to get rid of enough RINOs this past November, particularly in the senate.

    As a new party, they were not able to field strong candidates (or any candidates) during the primary cycle in some areas. As a result, conservatives found themselves all too often having to support some very un-conservative Republicans. I remember one Tea Party woman saying to a re-elected RINO, “Now that I’ve voted for you, I’m going to start working tomorrow to get you out of office.”

    So for now, we’re going to have to put up with the continuation of a lot of Rove/Bush-era crap from the GOP’s worn-out holdovers as they team with Democrats to do D.C. business as usual.

  • avatar

    This is a sad day for the US. The government will raise taxes, or it will increase spending of fiat money on entrenched corruption. What is behind door number 3?

  • avatar

    Congress… They never miss a chance to miss the boat. They never met a mistake they didn’t want to make, right there, on the Rotunda floor. If only the socialist corn lobby were the worst of her problems, America would be in pretty good shape.

  • avatar

    Ethanol, especially corn ethanol is STILL a waste of time and money. In addition to being subject to corn supply/demand and needing dedicated tankers or pipelines, it will continue to be under constant price-pressure due to the worldwide glut of gasoline and ever-improving fuel economy.

    Conversely, diesel is and will continue to be in worldwide demand. We should be doing everything possible to increase biodiesel supply.

    • 0 avatar

      Don’t forget that Brazilian ethanol comes from sugarcane, and we all know the USA does not need any more sugar. Southernmost farmers should be growing sugarcane so corn is left for the table not the gas tank.

      I never understood why the US doesn’t ask all these impoverished Central American countries to grow sugar cane. We would buy all they produce to convert it to ethanol. Grow cane not cocaine! I’m sure this has to do a lot with the Corn Lobby, ADM and Iowa as was stated by many.

    • 0 avatar

      Cuba is going back under America’s umbrella soon. You’ll get all your sugarcane sugar there.

    • 0 avatar

      “we all know the USA does not need any more sugar”

      That’s right. With sugar price supports making sugar in the United States cost 4 times the world free-market price, we’re all busy drinking and eating all the high-fructose corn syrup we can get. Who needs sugar to get fat?

  • avatar

    Congress has turned corn farmers into our enemies.

  • avatar

    Maybe Marcelo can help me here.

    What goods or services would Brasil slap a tariff on in a trade war with the US?

    • 0 avatar

      Most services are prettty much well protected. American law offices have opened offices here, but so far have been relatively unsuccessful. Brazil protects itself there pretty well.

      I’m not absolutely certain (and don’t have time now to look it up), but as the result of the last contention and fight at the WTO (oranges I beleive) the US lost and American cars pays 45% tarriff as oposed to 35% tariff of everybody else. This affects just the Malibu I believe.

      The last time they listed ahuge list of things that would get slapped but due to the crisis Brazil just picked and chose and didn’t apply all counter penalties it could legally apply. Cars being one token signal, but a sign that Brazil can get serious if it wants.

      Now the sugarcane lobby is hugely powerful in BRazil. If Brazil wins at the WTO (and it’ll probably win as the American action seems illegal), maybe the next new President who takes office next year will use it to flex her muscle. Such a move would be right up her ally (sp???), being an ex-left wing guerrilla and all. Sigh!

      Net year look for this to really catch on.

  • avatar

    Sadly, the domestic closed-borders ethanol production is here to stay permanently.
    The Republicans will support the pork for their farmer states; the Democrats think ethanol is environmentally friendly; and to this toxic mix a sauce of “diminish our dependence on foreign oil” is added.
    “Dependence on foreign oil”… our oil comes from very diverse sources from all over the world, mostly Canada.

  • avatar

    Ahhh Ha!  We’ve traded OPEC for CORNPEC.  At least the subsidies don’t end up with tha Taliban…..

  • avatar

    If increased imports of cane ethanol from Brazil came to pass, I would fear for the remainder of the Amazon rainforest, which I don’t think the world could do without.

  • avatar

    Corn growers get billions. Ethanol makers get billions. Banks get billions. Carmakers get billions. UAW retirees get billions.
    We laugh at the graft and corruption of the past — Teapot Dome and all the rest. Yet graft and corruption today is as bad as ever. It sickens me.

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