NCGA Supports Senators’ Efforts to Keep Ethanol Tariff (5-8-06)

The National Corn Growers Association (NCGA) applauds Sens. Charles Grassley (D-Iowa) and John Thune (R-S.D.) for their letter supporting the secondary tariff on imported ethanol.

The senators issued a statement last week indicating lifting the tariff would not mean lower prices or reduce our dependence on oil.

“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,” the senators’ statement said. “So lifting this tariff would be counterproductive to the widely supported goal of promoting homegrown renewable sources of energy.”

Recently, President George W. Bush and oil industry representatives have suggested removing the tariff may increase ethanol supplies. The imported ethanol would come mainly from Brazil, which produces its ethanol from sugarcane and has built a strong renewable fuels industry. Removing the tariff would be a rash and inappropriate decision, says NCGA CEO Rick Tolman.

“First, there is plenty of ethanol to supply the United States,” Tolman said. “We are producing ethanol at a record clip, increasing our capacity almost every day. Our capacity is estimated to reach almost 6 billion gallons in 2006. Second, the Caribbean Basin Initiative already allows Brazil a ready opportunity to export ethanol tariff free—up to 7 percent of the U.S. supply. In fact, Brazil is already on a pace to break all records for exports of ethanol to the U.S., nearly doubling the amount the exported to the U.S. last year.  With the Caribbean Basin option and the high price of fuel, the import tariff has not been a constraint to ethanol exports to the United States by Brazil.”

Tolman also noted that the Brazilian ethanol industry already receives many subsidies from its own government.

“In essence, if we drop the tariff, U.S. taxpayers will be further subsidizing already heavily subsidized Brazilian ethanol,” he added.

Grassley and Thune also said rescinding the tariff would not be beneficial for rural America or consumers.

“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.