Why may ethanol be imported?


The harder anyone scratches the Central American Free Trade Agreement pushed by the White House, the worse the smell in American agriculture gets.
First, it was the creeping expansion of the agreement’s sugar exports to the United States.
Next, it was the time – years, even decades – before U.S. farmers received duty-free, total access to the tiny, poor Central American countries included in the agreement.
Now it’s American agriculture’s shiny, new star – ethanol – in the agreement’s gunsight.
Importing ethanol? According to a report issued by the Institute of Agriculture and Trade Policy, the agreement virtually guarantees a rising tide of duty-free ethanol exports from Caribbean and South American nations to the United States.
A whiff of that plan arrived a year ago when Cargill, Inc., the $63 billion agbiz elephant, announced plans to use a little-noticed clause in the Caribbean Basin Initiative to ship sugar-based, Brazilian ethanol into El Salvador for dehydration, then export to the United States.
Under the initiative, up to 7 percent of total annual U.S. ethanol production – made from a “foreign feedstock, i.e. sugar from another, (noninitiative) country,” notes the report – can be exported to the United States duty-free if it is produced in any of the 24 nations covered by the initiative.
Years ago that was a drop in the ethanol bucket. Now, however, with the ethanol market booming in the United States, and Congress likely to mandate 8 billion gallons – more than two times today’s production – of ethanol use by 2012, the bucket will overflow.
Possible figures. Under the initiative, nearly 240 million gallons of Caribbean-sourced ethanol can enter the U.S. tariff-free in 2005; and, more than 560 million gallons can enter in 2012 if the pending energy bill includes the 8-billion-gallon mandate.
Then, according to the report, once that threshold is hit, the initiative allows “an additional 35 million gallons (to) be imported into the United States duty-free, provided that at least 30 percent of the ethanol is derived from ‘local,’ or Caribbean region, feedstocks.”
Yep, sugar. After those two targets are hit, more Caribbean ethanol can be imported.
“Anything above the additional 35 million gallons is duty-free if at least 50 percent of the ethanol is derived from local feedstocks,” the report explains.
Gee, more imported sugar, er, ethanol. And that’s exactly what will happen under the agreement, explains the report, because “(the agreement) adopts the (initiative) language for ethanol” and “makes the (initiative) allowances on ethanol exports to the United States permanent.”
Worse, yet. As smelly as that will be for the farmers who grew the 1.26 billion bushels of corn used to make 3.4 billion gallons of American ethanol in 2004, and who now own 40 percent of the domestic ethanol production capacity, it may get worse.
U.S. Trade Representative Robert Portman calls the agreement a “gateway” that opens the door to the Bush administration’s bigger, hemisphere-wide Free Trade Area of the Americas, or FTAA.
In effect, the initiative-to-agreement-to-FTAA triple play will open the U.S. bio-fuels market to ethanol giant Brazil, which, in 2003, produced 3.6 billion gallons of ethanol from sugar.
Investing in agreement. It is a maneuver that free-trading agbiz masters like Cargill appear to be banking on.
In May 2004, Cargill announced a $10 million partnership to build a 63 million gallon ethanol dehydration plant in El Salvador to export Brazilian sugar-based ethanol into the U.S. duty-free under the initiative.
In December 2004, Cargill and Brazilian commodities trader Coimex struck a deal to drop another $10 million in a Jamaican ethanol plant to, again, dehydrate Brazilian ethanol.
On May 19, 2005, Cargill announced it would invest in one of Brazil’s biggest sugar processors, a producer of about 50 million gallons of ethanol.
Opposition to report. The Renewable Fuels Association, ethanol’s Washington, D.C., lobby, objects to the institute’s assertion that the agreement means greater ethanol imports.
“They’re allowed under (initiative) already,” said spokesman Monte Shaw.
OK, but why institutionalize what could be a flood of imported ethanol with the agreement and FTAA?
On second thought, ask your local National Corn Grower Association director, your county Farm Bureau president or the American Soybean Association – all strident agreement and FTAA supporters – why America needs to import any ethanol at all.
(Alan Guebert’s Farm and Food File is published weekly in more than 75 newspapers in North America. He can be contacted at agcomm@sbcglobal.net.)

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Alan Guebert was raised on an 800-acre, 100-cow southern Illinois dairy farm. After graduation from the University of Illinois in 1980, he served as a writer and editor at Professional Farmers of America, Successful Farming magazine and Farm Journal magazine. His syndicated agricultural column, The Farm and Food File, began in June, 1993, and now appears weekly in more than 70 publications throughout the U.S. and Canada. He and spouse Catherine, a social worker, have two adult children. farmandfoodfile.com