Brazil complaint to World Trade Organization over US ethanol tariff more likely

In Brazil, Cosan called on the Brazilian government to intervene with the US government more forcefully on ethanol tariff, and observers said that Brazil may take the US to the World Trade Organization over the tariff, if the US Farm Bill is signed in its existing form with a renewal of the tariff.

The WTO has commenced an investigation into US farm subsidies following protests from Canada and Brazil. The Canadians and Brazilians allege that the US has exceeded its $19.1 billion cap on farm subsidies in six of the past eight years, including subsidies for biofuel feedstocks such as corn and soya.

It will be the first time the World Trade Organization has ruled on energy subsidies.

The convergence of energy and agriculture in the biofuels industry is expected to pose thorny questions for the WTO. While neither sector has enjoyed free trade conditions, the subsidy mechanism which has supported national agriculture interests has attracted negative attention far more than the cartel approach employed in the oil industry.

The issue is a key point of contention imperiling the Doha round of global trade talks. The United States and European Union have blocked a Brazilian proposal to include biofuels among “environmental goods” scheduled for tariff reduction or elimination in the next world trade treaty. The US and European position is that the environmental designation rules are for industrial products, not agriculture.

 

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