The Oil and the Glory
Tomorrow on Capitol Hill: A completely unpredictable discussion about Brazil and ethanol subsidies
Because it’s one of the biggest new players in oil, Brazil gets much respect from Big Oil and all the industrial powers. But in one aspect, that street cred hasn’t extended to Washington. Tomorrow, we are told, Democrats in the U.S. Congress will consider whether to continue slapping a 54-cents-a-gallon tariff on Brazil’s sugar ethanol ...
Because it’s one of the biggest new players in oil, Brazil gets much respect from Big Oil and all the industrial powers. But in one aspect, that street cred hasn’t extended to Washington. Tomorrow, we are told, Democrats in the U.S. Congress will consider whether to continue slapping a 54-cents-a-gallon tariff on Brazil’s sugar ethanol while the U.S. also subsidizes home-grown corn ethanol at the rate of 45 cents a gallon.
The issue will be taken up during an informal meeting of the Democratic members of the House Ways and Means Committee, according to a reader who passed along this agenda. The tariff-and-subsidy package looks likely to be added to Senate legislation, too.
For those of you who don’t live in the United States, here’s a brief lesson on why exactly this thing has been on the books for thirty years: You see, one of the only issues on which both major U.S. political parties can agree is that it’s bad, bad, bad to import half the country’s oil supply, especially barrels from the Middle East — ergo the subsidy for U.S. corn ethanol producers. (The fact that the agricultural lobby is among the most powerful forces in U.S. politics might have something to do with it, too.)
The parties also generally agree that America’s agriculture industry — which, after all, has only been around for 400 years or so — may one day be strong enough to stand on its own, but for now is still too fragile to withstand direct competition. That explains the tariff on Brazilian ethanol producers. (Please refer to parenthetical material in previous paragraph.)
This eminently sound logic doesn’t thrill the Brazilians, for some reason. "It’s an affront to my intelligence, and to my wallet as a taxpayer," Joel Velasco, a lobbyist for the Brazilian Sugarcane Industry Association, said in an interview.
In 2009, Brazil exported 200 million gallons of sugar ethanol to the U.S., a volume which, if continued at that rate, would amount to 6 percent of the 12 billion gallons of ethanol that will be blended into U.S. gasoline this year.
Over at the Financial Times, Gregory Meyer writes that the ethanol policy is part of America’s larger conflicted attitude toward agricultural imports.