Sugaronline Editorial - The opposite of free By Meghan Sapp
Published: 08/25/2017, 11:28:00 AM
Tariffs, tariffs everywhere and not a route to trade.
Free trade proponents are having a hell of a hard time this week, seeing their hopes dashed from one continent to another, leaving them to wonder just what they have to live for. It’s providing job security for lobbyists and lawyers for sure but for the trade, every day just seems to be getting more complicated.
The biggest news this week—which hardly came as a surprise to many as the decision has been brewing for months and the details surfacing in recent weeks—was Brazil’s decision to slap a 20% import tariff on ethanol above 600 million litres per year. It was a direct hit at the US who has been supplying the market during the interharvest period for years but was happy to also step in when the supply gap continued through the crush thanks to mills focusing on sugar production.
The North-Northeast producers have been hit hardest, as most of the ethanol imports enter through their ports, making it more logical to penetrate those local markets. But with RenovaBio coming around the corner and the major bump to the sugarcane industry that is meant to follow as Brazil puts its climate change focus on boosting ethanol production and consumption, well, that leaves little room for US corn-based ethanol. So, buh bye.
That left the US ethanol industry up in arms, of course, because they had been happy to send their ethanol south since China no longer was an open market for its excess ethanol. China closed its doors to ethanol imports late last year, with imports falling 99% on the year even in July, while boosting its own exports as it attempts to work through 20 million metric tonnes of spoiled maize. China had been a major destination for US ethanol so that fuel had to go elsewhere. Now that Brazil is limited to 600 million litres per year, it’s going to have to find someone else to supply. The Philippines? Haiti for cooking fuel?
In an unrelated move, but still amusing because of the irony (who says Americans don’t understand irony?), the American biodiesel industry did to Argentina and Indonesia this week something similar to what Brazil did to its ethanol brethren: slam insurmountable import tariffs that will keep its shores free of foreign biodiesel until someone like the WTO says it can’t. The impressive 64% import tariff is nearly triple the tariffs that the European Union lobbed on Argentine and Indonesian biodiesel imports back in 2013 but courts since ruled those must be dropped.
So the Argentine biodiesel that had gone to Europe was diverted to the US and will be headed back to Europe again. Dizzying to say the least.
Indonesia isn’t getting off quite so easy, though, because the European Parliament and the Norwegian Parliament are putting in rules that will keep Indonesian palm oil out due to environmental sustainability challenges. No love there either, it seems.
Oh those heady days of the Doha free trade rounds, they seem so long ago. The world has changed so much since then. It has left free trade behind and gone introspective, focusing on “free trade agreements” that aren’t so free like those between Europe and Mercosur or Europe and Canada. The US still has the North American Free Trade Agreement, that too has become less free, and it’s far from clear how long that is going to last in any shape or size anyway. So how far will the pendulum swing this time?