The current ethanol reform bills, the Grassley bill and the Coburn-Feinstein bill, would destroy our ethanol industry, an industry that has been heralded as THE success story of the Caribbean Basin Initiative (CBI)
By eliminating or greatly reducing the tariff, we cannot compete with Brazil. They will ship directly to the US instead of processing in our plants. The tariff encourages Brazil to use our plants.
The tariff preferences for ethanol were provided in the Caribbean Basin Initiative (Caribbean Basin Economic Recovery Act) and the Central America Free Trade Agreement (CAFTA). As amended in the Steel Trade Liberalization Act, we have a quota of 7% of the US ethanol market. Based on these trade commitments, more than $250 million has been invested to create our ethanol industry, $500 million in foreign exchange annually and thousands of jobs.
In Jamaica, it accounts for 80% of total CBERA exports to the US. In Costa Rica it is the second largest export stimulated by CAFTA. In Trinidad & Tobago , ethanol production has doubled and a third facility is planned. In El Salvador, the two facilities are joint ventures with American companies, Cargill and Vitol.
The CBI and CAFTA tariff preferences on ethanol provided the largest gain to US consumers ($90 million) of all exports from the region; a/c to the USITC.
Having the tariff in place does not increase the price of imported ethanol. The price US consumers would have paid for imported ethanol would have been 24% higher without the CBERA and CAFTA; according to the USITC. The tariff does not keep out cheap ethanol. We have shown that.
Brazil, India and Australia are not in a position to supply significant quantities of ethanol. We are. India is a net importer. Australia’s limited surplus goes to Asia. Brazil supplies of anhydrous, fuel grade ethanol are going to India, China and Europe and now into the lucrative specialty chemical market. They will have very little for the US market (despite their claims). They are importing large quantities of fuel ethanol (from the US). They will have much larger supplies of hydrous alcohol to send us for processing into fuel ethanol for export to the US.
It is important to recognize that the tariff is a means to cause duty-free ethanol to be imported through the Caribbean Basin instead of Brazil.
Our product is a low carbon fuel. It has 61% less carbon than gasoline. EPA and CARB have classified it as meeting the requirements of advanced biofuel under Section 211 (o) of the Clean Air Act.
A University of Missouri study concluded that “by removing the ethanol tariff, billions of dollars in economic activity would be lost. The decline in economic activity would start at $9.2 billion in the first year and reach $36.7 billion in the third year. Job losses would be 161,383 by the third year.”
CBERA and CAFTA would be irrevocably damaged if the ethanol tariff preferences are changed due to S. 871. It would question the credibility of these trade agreements. According to the American embassy in Barbados, “ CBERA is an important economic, political and even psychological benefit for the region”.
We request that you amend the ethanol provisions in S. 871. Our proposal would still meet your objectives of reducing dependence on foreign oil, reducing the price of ethanol, increasing supplies of low carbon fuel and protecting important trade relationships. We suggest either:
Maintain the tariff until the 7% quota for ethanol exports from the Caribbean Basin has been filled and then remove the tariff; or,
Have a tariff of 45 cents/gallon for advanced biofuels only, as contained in S. 530 of March 10, 2011.
For more information contact George Fitch (540) 272-9256; firstname.lastname@example.org