Commentary Questions Need for Ethanol Tariff

Cindy Zimmerman

An editorial in the Wall Street Journal this week entitled “What’s Wrong With Free Trade In Biofuels?” questions the need for tariffs on low cost ethanol from Brazil if we are really serious about energy security in this country. As Hollman W. Jenkins words it – “The U.S. imposes a 54-cent-a-gallon tariff on Brazilian ethanol, to discourage competition with domestic ethanol, which receives a 54-cent subsidy from taxpayers. … This should lay bare the fraud that what’s going here has anything to do with energy security. It has only to do with the agricultural lobby masquerading its interests behind foolish and misleading rhetoric about energy security.”
I would suspect that the tariff is likely to go away at some point, assuming that someday a World Trade Agreement will be reached. In the meantime, I will make a couple of points in support of the tariff in the short term.
First of all, as anyone knows, Brazil has access to an abundance of cheap labor – due mainly to the fact that they don’t have the stringent labor laws that we do here in the United States. No requirements for workers comp, unemployment, health insurance, etc. That is one of the main reasons they can produce ethanol so cheaply. So, the tariff is a way of “leveling the playing field” – at least for now. It’s one of the major reasons we have a tariff on Brazilian orange juice, for example.
Second, the point is made that we are talking about energy SECURITY. That would mean trying to have most of our energy come from sources here in our own country. Why would we want to transfer our energy dependence from the Middle East to some other country because they produce alternative fuel cheaper than we do? Doesn’t make any sense to me. It does make sense to help the domestic industry grow with reasonable subsidies and such – but I think there should at the same time be a plan to wean from that assistance once the industry gets old enough.
People can complain about farm subsidies all they want, but the fact is that our country without question has the safest, most abundant and most affordable food supply in the entire world. And that is very much due to the fact that we have helped to support our farmers so that our country would not have to rely on other countries for our food supply – in other words, so we would have “food security.” The portion of the national budget that goes to “farm subsidies” is less than one half of one percent. Even within the USDA budget, only about 22 percent goes to farm and commodity programs, while 56 percent goes to domestic food assistance programs – and most of the rest to conservation, forestry, research and rural development. (source: USDA) The pay off is that we spend less than ten percent of our disposable personal income on food – an incredible bargain by anyone’s standards. Maybe with a little bit of subsidizing the same thing can be done for energy.

Ethanol, Government