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Senators: Lifting tariff on ethanol imports a 'kick in the face' to rural America

Agriculture.com Staff 05/05/2006 @ 8:21am

As American consumers continue to struggle with the high cost of gasoline, the Bush Administration would like to see a 54-cents-per-gallon tariff on ethanol imports lifted, at least temporarily.

The thinking behind that move is that by increasing the domestic gasoline supply prior to this summer's busy travel season, prices at the pump will go down. "If the American people want there to be a lower price of gasoline, we need more gasoline on the marketplace," President Bush said in a meeting with members of Congress on Wednesday.

The president, however, doesn't have the authority to actually lift the tariff. That type of mandate would have to come from Congress, which put the tariff in place in 1980 as part of a plan to reduce America's dependence on foreign sources of energy.

Not everyone thinks lifting the tariff is a good idea, though, and some doubt it would lower gas prices for the consumer at all.

"Removing the 54-cent secondary tariff would in essence be asking American taxpayers to further subsidize already heavily subsidized ethanol and sugarcane production in countries like Brazil," the Renewable Fuels Association (RFA) said in a fact sheet on its Web site.

American gasoline refiners currently receive a 51-cent tax incentive for every gallon of ethanol blended into gasoline, whether that ethanol comes from the U.S., Brazil, or any other country. "Brazil does not need U.S. tax dollars to compete effectively, as evidenced by the fact 135 million gallons were imported last year and those volumes are increasing," RFA said.

Besides, according to Senators Chuck Grassley (R-IA) and John Thune (R-SD), Brazil doesn't have enough ethanol to export at significant levels right now anyway, and they already ship duty-free ethanol to the U.S. under the Caribbean Basin Initiative. That agreement allows Brazilian ethanol dehydrated in a Caribbean country to enter the U.S. duty-free, at amounts up to 7% of the U.S. ethanol market. "That's generous access, but Brazil has never even come close to hitting the 7% cap," the senators said in a joint statement issued yesterday.

"Today’s energy crisis underscores the need for our country to develop domestic energy supplies, and alternative energy like ethanol is key to reducing our dependence on foreign sources of oil," Grassley and Thune said. "So lifting this tariff would be counter-productive to the widely supported goal of promoting home-grown renewable sources of energy."

The senators said lifting the tariff would actually help the oil companies, because they are the major buyers of imported ethanol. Without the tariff, these companies would save a great deal of money, with no guarantee consumers would feel the effects of those savings at the pump.

"So lifting the tariff would be a victory for the oil companies, a kick in the face to rural America where the ethanol comes from, and leave consumers with the same high gas prices we have today," they said.

As American consumers continue to struggle with the high cost of gasoline, the Bush Administration would like to see a 54-cents-per-gallon tariff on ethanol imports lifted, at least temporarily.

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