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Brazil Wants U.S. Counterpart to Negotiate Ethanol Import Tax

The United States started to pay a 20% tariff on all ethanol exported to Brazil this month. Before that, there was a quota of 750 million liters per year at zero rate, which expired on August 30th. Valor Econômico writers Rafael Walendorff and Camila Souza Ramos reported that the Brazilian government must communicate to the United States that the country is willing to negotiate the conditions for the ethanol trade, but without extension of the tariff- free quota.

In addition, the article noted that producers and industry asked the government not to renew or create quota for ethanol imports if there is no concrete signal from Donald Trump to favor Brazilian sugar exports to the Americans. The president of the Federation of Sugarcane Planters (Feplana), Alexandre Andrade de Lima, said to Valor Econômico that the sector agrees to discuss the following:

“The United States had 12 months to define the quota issue of Brazilian sugar for the Americans and only now, at the end of the term of the ethanol quota, do they come to ask for an extension.”

According to the Union of the Sugarcane Industry (Unica), the Brazilian government showed sensitivity to their industry interests by not renewing the quota for exemption for foreign ethanol, even with pressure from the US.  According to the organization, the United States did not provide a counter offer, and they charge Brazilian sugar at more than 140%.

Canal Rural writer Paola Cuenca reported that presidents of entities in the ethanol sector are favorable to negotiating a new quota only if the United States reduces the tariff imposed on Brazilian sugar.

O Estado de S. Paulo writer Lorenna Rodrigues reported that the end of the exemption quota for ethanol imports from the United States opened a dispute in the Brazilian government and pitted the Ministries of Agriculture and Foreign Affairs on opposite sides.

According to the newspaper, Chancellor Ernesto Araújo would like to give the United States more time and defends the quota renewal for 90 days. The idea is to negotiate of an agreement with the Americans that involves access to their market for Brazilian sugar in exchange for the removal of the tariff on ethanol imported by Brazil. On the other hand, the Ministry of Agriculture is against the quota renewal and wants to use the immediate collection of the tariff as an instrument of pressure for the agreement to come out.

Last week, the Agricultural Parliamentary Front (FPA) asked President Jair Bolsonaro that the quota for import of ethanol from outside Mercosur without tariff is not reopened, because there is no “equivalent counterpart” from United States. In a note, the parliamentarians said that “American interests cannot overlap with the of Brazilians” and defends “free and fair” trade, without maintaining protectionist practices against Brazilian products:

“We appreciate the relationship with the U.S., a country with which we share values ​​and ideals, but American interests cannot overlap with that of Brazilians,” said the note.

The FPA note added that sugar imports into the US are regulated by quotas. Currently, the import quota for Brazilian sugar at zero tariff in the US is 152.7 thousand tons, less than 1% of Brazilian exports. Above that quota, the US applies a tariff of $ 337.92 per ton.

According to Globo Rural magazine, a negotiating solution would be the possibility of seeking to open the American market to Brazilian sugar.

The Brazilian Agriculture and Livestock Confederation (CNA) is also against the renovation the ethanol exemption quota. The organization argues that the sector needs to restructure after the strong impact caused at the beginning of the pandemic. By notice, CNA stated that the ethanol sector experienced a reduction in the competitiveness, promoted by the drop in the international price of oil and the decrease, close to 30%, in consumption in the domestic market.

The Jovem Pan website showed that the Brazil received more than 1.4 billion liters of ethanol the last year, 90% of which came from the United States.

Joana Colussi is a journalist and visiting researcher at the University of Illinois at Urbana-Champaign (UIUC). Previously, she has reported on various agribusiness and economics topics for prominent Brazilian media publications, such as Grupo Globo affiliates. Joana holds a Master’s degree in Agribusiness, and is a Ph.D. candidate in Management at the Federal University of Rio Grande do Sul (UFRGS-Brazil).

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