3rd September 2008

Brazil likely to challenge the US on ethanol imports

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Brazil is likely to challenge the US at the WTO over its tariffs on imports of ethanol, said the country’s Foreign Minister Celso Amorim on Tuesday, 2 September.

This most recent probable dispute comes just months after the WTO ruled in favour of Brazil in their case against the US and the subsidies it pays to its cotton farmers. The WTO’s ruling allows Brazil to seek USD 4 billion in retaliation.

In this latest case, Brazil claims that the US’s 54 cents per gallon tax on ethanol entering the United States is an obstacle to exportation. Brazil’s Sugar Cane Industry Association has hired attorneys to study the compatibility between the US tariff’s and WTO rules. According to the Foreign Minister, the case is likely to be brought to the WTO within the next one to two months, depending on the final consultations with the government’s attorneys. The recent collapse of the Doha Round talks in Geneva in late July have increased the possibility of more immediate litigation.

“My reading is that we have a very strong case and so there is a good chance we will challenge,” Amorim told reporters in Rio de Janeiro.

Brazil is the world’s largest ethanol exporter and the US, its largest importer. US President Bush signalled in early June that the US will increase its consumption of ethanol from 5 to 35 billion gallons by 2017, using both imports from Brazil and the United States’ own domestic corn-based ethanol. The US is currently developing ethanol derived from corn, though some critics claim it is far more expensive than its sugar-cane counterpart.

Criticism, however, has not been reserved for the United States: environmental advocates have alleged that Brazil’s ethanol production has contributed to tropical deforestation and threatened ecosystems. Environmentalists also argue that the energy needed to produce ethanol emits more greenhouse gases than the fossil fuels it aims to replace.

For a more in-depth analysis of the ethanol and cotton cases, please visit this week’s Bridges Weekly.

To learn more about Brazil’s sugar-cane based ethanol and some of the issues surrounding the industry, click here.

ICTSD Reporting; “Brazil sees WTO ethanol case against U.S. soon,” REUTERS, 2 September 2008; “Brazil may press WTO on US ethanol tariffs,” INTERNATIONAL HERALD TRIBUNE, 3 September 2008.

Sugar-cane photo: REUTERS/Rickey Rogers.