Europe Preparing Duties On US Biofuel
Published: February 25th, 2009
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The New York Times reports that the European Union is drafting trade duties on imported American biofuels to protect its own $10b biofuel industry. Even though both the US and the EU subsidize biofuels, European producers complain that American producers benefit from production subsidies in the US and retail subsidies in Europe. The EU has been investigating these claims, and tariffs of 44 euros per 220 lbs of imported biofuel could be put in place by this summer. Meanwhile American subsidies for corn ethanol production are set to expand indefinitely. We’ve argued that trade disputes could bring the bailout boom to a rapid close, but perhaps such a dispute will rid us of wasteful ethanol pork first.
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@Jerome10: Agreed. The US is supposed to have a completely open market to al comers, but the second we enact a minor trade barrier or subsidy, the world goes crazy. Time for reciprocal trade laws. Whatever their law is on importing our goods, we have the equal law on theirs.
@dwford Beware the Law of Unintended Consequences. In the early 1960s, Germany imposed an import tariff on US chickens. In 'retaliation', the US imposed a 25% tariff on imported trucks. This was inconsequential in the 1960s, but became a big deal as trucks from Toyota, Nissan, and Mazda (Ford Courier) became popular. Remember the Subaru Brat (the first one) with the 'jump seats' in the bed? That was to dodge the tariff. I remember one US automaker (Ford?) sued Nissan because Nissan was declaring the Pathfinder as a 'passenger vehicle' for import tariff purposes (See, it's got a back seat...), but a 'truck' for safety/smog purposes (See, it's built on the Hardbody truck chassis...). I am not against a tariff system (to eliminate 'free trade' as a source of labor arbitrage), but we need to be careful how we implement such things.
@dwford Except that you have it backwards. The US is the country with much worse tariffs on biofuels than Europe. Europe in this case is the one engaging in retaliation. Of course, in everyone's mind, each action is always "retaliation" for something that the other did. It's always "He started it!," you know? Not that it makes sense to throw rocks in your own harbor because your trade partner has done so.
Why can't we admit that we made a mistake? Corn based bio fuel may be slightly economically practical but sugar cane and now algae appear to be much more practical. We tried corn for fuel, it worked, but not very well so lets stop the subsidies and move on.