Tariffs on Ethanol
New York Times columnist Tom Friedman writes about US tariffs on Brazilian sugar ethanol and calls them "dumb":
The column (which unfortunately is only available to 'Times Select' subscribers) is also about environmental impact of expanding sugar ethanol production in Brazil. He argues that it is unlikely to harm the Amazon forest (can't grow there) but that environmental planning will be needed to make sure that a massive expansion of area under cultivation does not have too many adverse impacts on other ecologically sensitive lands in southern Brazil.
Thomas Friedman is also known for having written enthusiastic pro-globalization (and best-selling) books including The World is Flat and The Lexus and the Olive Tree.
Thanks to pressure from Midwest farmers and agribusinesses, who want to protect the U.S. corn ethanol industry from competition from Brazilian sugar ethanol, we have imposed a stiff tariff to keep it out. We do this even though Brazilian sugar ethanol provides eight times the energy of the fossil fuel used to make it, while American corn ethanol provides only 1.3 times the energy of the fossil fuel used to make it. We do this even though sugar ethanol reduces greenhouses gases more than corn ethanol. And we do this even though sugar cane ethanol can easily be grown in poor tropical countries in Africa or the Caribbean, and could actually help alleviate their poverty.
Yes, you read all this right. We tax imported sugar ethanol, which could finance our poor friends, but we don’t tax imported crude oil, which definitely finances our rich enemies. We’d rather power anti-Americans with our energy purchases than promote antipoverty.
The column (which unfortunately is only available to 'Times Select' subscribers) is also about environmental impact of expanding sugar ethanol production in Brazil. He argues that it is unlikely to harm the Amazon forest (can't grow there) but that environmental planning will be needed to make sure that a massive expansion of area under cultivation does not have too many adverse impacts on other ecologically sensitive lands in southern Brazil.
Thomas Friedman is also known for having written enthusiastic pro-globalization (and best-selling) books including The World is Flat and The Lexus and the Olive Tree.
Comments
1. If Brazilian ethanol provides 8 times the energy of the fossil fuel required to make it vs. only 1.3 times for corn ethanol, it would seem that the world would be improving its energy efficiency by relocation ethanol production to Brazil.
2. Friedman admits to several environmental concerns on the Brazilian side from an expansion of sugar cane production. A US tariff seems a very blunt instrument to try to stop harm to those fragile lands, since they are going unprotected from other uses right now. It would seem that a better approach -- and Friedman raises this --is to attack the source of the problem directly and put in zoning ordinances and enforcement to protect fragile lands from coming under cultivation. Although Brazilians would surely say that it is an assault on their sovereignty, the US might trade its tariff reductions for evident progress on this front.
Finally, it's worth underlining Friedman's point about potential for poverty reduction.
Sugar cane production in Brazil employs about 1 million workers, and (assuming unchanging factor-intensities) one prediction is that number would more than double (source:http://socrates.berkeley.edu:7001/Events/spring2005/04-20-05-furlan/index.html) from the expected expansion if US tariffs were removed. Cane-cutting is hard labor, but this would surely raise unskilled workers wages.
The BBC had a recent interesting article on another Brazilian sector held back by US protectionism, and evidene of wages paid there: Brazil feels the squeeze in juice war
Being a debtor nation, Brazil has no leverage to ask for trade fairness.
America on the other hand, applies the double standard.
It applies one standard on Brazil and the opposite on the Oil rich states.