USDA Chief economist: US tariff doesn't block much foreign ethanol

Interestingly, sugarcane-based ethanol imports from Brazil would increase if the U.S. scrapped its import tariff, but the surge would be small and not make much of an impact on the U.S. market, U.S. Department of Agriculture Chief Economist Keith Collins said [read his full testimony, here].

Over the long term, such a move might be significant, Collins said, but the U.S. now imports only about 80 million gallons per year from Brazil. Doubling or tripling that wouldn't make much of a difference on a U.S. market that will consume about 5 billion gallons of U.S.-produced corn-based ethanol this year.

Collins, testifying before the U.S. Senate Environment and Public Works Committee, said the impact of a surge in imports from Brazil would only impact the U.S. market "marginally at best":
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Sen. Frank Lautenberg, D-N.J., suggested that over the long term, increased competition from Brazilian imports might spur stronger U.S. production. The idea of allowing more ethanol imports elicited sharp complaints from Sen. John Thune, R-S.D., who expressed fears that the U.S. could become too reliant on Brazilian supply. He said he wants the U.S. to rely solely on "American energy."

Collins said he wasn't worried about the U.S. becoming reliant on Brazilian ethanol regardless of whether or not the 54-cent-a-gallon import tariff remains in place. Brazil is currently limited in the amount of ethanol it could conceivably export to the U.S., Collins said.

The country consumes much of the ethanol it produces, sends much of its ethanol exports to Asian countries and exports about half of its sugar production. Ethanol producers and the Renewable Fuels Association have railed against the idea of lifting tariffs on ethanol imports.

RFA President Bob Dineen, in a Senate hearing in May, pointed to the fact that ethanol users benefit from tax credits whether the fuel is domestic or imported. If Congress were to eliminate the 54-cent-a-gallon import tariff, Dineen said, the result would be "U.S. taxpayers subsidizing already subsidized foreign ethanol."

The U.S. tariff is set to expire in 2007 and USDA Secretary Mike Johanns has said previously he believes that it isn't essential to U.S. corn and refining industries.

All we have to say is: if this is indeed the case, then please scrap the tariff and give American consumers value for their money.

More information
U.S. Senate Committee on Environment & Public Works, Hearing Statements, 09/06/2006:
Statement of Dr. Keith Collins, Chief Economist U. S. Department of Agriculture, Oversight on Federal Renewable Fuels Programs.