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Bush refuses to lift sugar tariff on brazil Original Source Link: (May no longer be active)
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Posted on Thu, Mar. 08, 2007
Bush focuses on ethanol agreement on visit to Brazil
By Jack Chang
McClatchy Newspapers
(MCT)
SAO PAULO, Brazil - A cooperation agreement between the United States and Brazil would be a historic opportunity for the world's two largest producers of ethanol to spur global use of the fuel.
But any agreement, expected to be the centerpiece of discussions here Friday between President Bush and Brazilian President Luiz Inacio Lula da Silva, may hinge on whether the United States drops a 54-cent-per-gallon tariff and a 2.5 percent ad valorem charge imposed on imports of Brazilian ethanol.
"The most important thing, really the only thing, for us, is the tax," said Maurilio Biagi Filho, who owns an ethanol refinery in Sao Paulo state and is the president of a national biofuels commission. "We have the ability to supply all the ethanol that the United States needs, and I hope this visit is the first step to eliminating the tax."
The Bush administration has ruled out eliminating the tariff, which has discouraged Brazilian ethanol from entering the U.S. market. Some Brazilian ethanol gets in because of trade rules that let Brazil ship a limited amount through Central American and Caribbean countries.
Still, optimism is high that Bush and Lula will make strides toward setting standards that would make ethanol an international commodity and developing aid programs that would encourage Central American and Caribbean countries to turn more of their sugar cane into ethanol.
U.S. ethanol boosters say an agreement with Brazil would help wean Americans off oil imported from hostile nations such as Iran and Venezuela. Bush has called for Americans to increase their use of ethanol sevenfold within the next decade.
"Clearly, this is an opportunity to lessen our dependence on fossil fuels from unpredictable, unstable and unfriendly parts of the world," said Brian Dean, executive director of the Miami-based Interamerican Ethanol Commission, which promotes regional ethanol production.
More important, however, would be establishing a global marketplace for ethanol, which would benefit both the United States and Brazil, who between them produce more than 70 percent of the world's ethanol.
"There's a lot of interest in ethanol now, but little infrastructure that would make ethanol competitive in many countries," said Sophie Aldebert, the Latin American director of the consulting firm Cambridge Energy Research Associates.
An agreement between Bush and Lula might give other countries in the hemisphere the know-how to produce more ethanol, which would lower the price for the biofuel and stimulate consumption, Aldebert said. If oil prices remain high, the popularity of ethanol would only grow, she said.
Bush arrived Thursday night in Sao Paulo, the first stop of a seven-day Latin American tour that will also take him to Uruguay, Colombia, Guatemala and Mexico.
About 10,000 demonstrators, chanting anti-Bush slogans, blocked traffic along Sao Paulo's busy Paulista Avenue in the city's downtown before Bush's arrival and vandalized cars and business. News reports said 17 people were injured, including 16 police officers.
In Rio de Janeiro, protesters attacked the U.S. consulate, breaking windows and splattering the building with paint.
There were also protests in Belo Horizonte, Belem, Salvador, Porto Alegre, and Recife, but those were largely peaceful.
None of the demonstrations were near the Hilton Sao Paulo Morumbi where Bush was to spend the night in this sprawling megalopolis, South America's largest city.
Bush wasn't scheduled to make any public appearances before touring an ethanol storage facility Friday morning, after which he and Lula are to make a joint statement on biofuel technology. He's scheduled to travel to Uruguay later Friday.
For Brazilian ethanol producers, Bush's visit is a chance to show off a biofuels industry that many consider a global model.
The country produced 4.6 billion gallons of sugar-cane-based ethanol last year, almost all of it consumed in Brazil. With Brazilians snapping up cars that run on ethanol and gasoline, ethanol makes up 40 percent of all fuel used by vehicles here. The country became energy self-sufficient last year with the expansion of ethanol use.
Brazilian producers boast that they eventually could churn out enough ethanol to replace 5 percent of the world's oil use.
"We have never had a problem with growing the cane, and we have never had a problem with the refining process," said Luis Cortez, a government energy adviser. "It's always been a problem of this regulation of the market, and that's what we hope gets talked about."
Brazilian producers argue that the United States needs Brazilian ethanol if it's serious about reducing fossil-fuel use. Cutting the tariff on ethanol imports is crucial, they said.
Corn-based ethanol produced in the United States is about 25 percent more expensive per gallon than ethanol made from sugar cane, a cost difference that limits its effectiveness as a replacement fuel, experts say.
Additionally, the United States lacks both the farmland to produce significantly more ethanol and the proper climate to grow much sugar.
Brazil, on the other hand, is the world's leading sugar-cane grower and could easily triple the acreage it uses to plant the crop.
"Brazil is the low-cost producer," said Amani Elobeid, an Iowa State University ethanol expert. "Removing the tariff would let the Brazilians bring in their ethanol and that would reduce the price."
A study Elobeid co-wrote found that removing the tariff would triple the amount of ethanol imported into the United States and decrease the domestic price for the biofuel by 13.6 percent.
Lula said this week during his weekly radio program that he would press the tariff issue with Bush.
"If it's about free trade, let's have free trade so that people have the opportunity to buy and sell," the Brazilian president said. "It doesn't make sense this high tax that the United States imposes on Brazilian ethanol."
Proposals to cut the tariff, however, draw stiff opposition from U.S. farm states, and Congress has shown little willingness to eliminate the tax, which is set to expire in 2009.
In a conference call Wednesday, Sen. Charles Grassley, R-Iowa, said the administration should focus on developing U.S. ethanol-producing capacity rather than increase reliance on foreign ethanol.
Brazilian ethanol experts said closer ethanol ties with the United States would be limited unless the tax is removed.
The possibility of scientific cooperation, for example, is small because the United States and Brazil produce ethanol from different feedstocks using radically different processes, Cortez said.
The only possible area of partnership would be researching biofuels made from non-food materials such as wood chips and switch grass.
"From this point of view of scientific cooperation, it will be very hard to find anything to cooperate on," Cortez said.
Brazilian officials, however, remain hopeful that the cooperation agreement will eventually help their country sell more ethanol to the United States. Lula will visit Bush at Camp David on March 31 reportedly to finalize the agreement.
"We're walking on the same road now, which I think is very important," said Biagi, the refinery owner. "And we all want to get to the same place. We want more people to use ethanol."
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BUSH'S SCHEDULE IN SAO PAULO ON FRIDAY:
(Times are local. Eastern Standard time is two hours earlier.)
10:40 a.m. - Bush visits an ethanol storage facility in Sao Paulo.
11:15 a.m. - Bush and Lula deliver a joint statement on biofuel technology.
12:55 p.m. - Bush and Lula meet at the Hilton Sao Paulo Morumbi.
1:30 p.m. - Bush and Lula continue talking over lunch.
2:45 p.m. - Bush and Lula hold a news conference.
3:45 p.m. - Bush and Mrs. Bush participate in a community roundtable before flying to Montevideo, Uruguay.
© 2007 KRT Wire and wire service sources. All Rights Reserved.
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