Brazil Threatens Trade War As Senate Moves To Approve Ethanol Subsidy Extension

Edward Niedermeyer
by Edward Niedermeyer

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…

Edward Niedermeyer
Edward Niedermeyer

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  • Robbie Robbie on Dec 10, 2010

    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.

  • Darkhorse Darkhorse on Dec 10, 2010

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

  • Shaker Shaker on Dec 10, 2010

    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.

  • Daanii2 Daanii2 on Dec 10, 2010

    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.