Ethanol Should Be Fully Integrated in International Trade, According to Brazilian Sugarcane Industry Association

Access to major markets around the globe for Brazilian sugarcane ethanol with lower tariffs, and full integration of ethanol in global trade, as is the case with any other product: these are the key expectations of the Brazilian Sugarcane Industry Association (UNICA) as the current phase of Doha Round negotiations in Geneva, Switzerland, draws to a close.

"What we expect now is full integration for ethanol into global trade. Ethanol should not be treated any differently because currently it is not considered a sensitive product in Europe or the United States," according to UNICA president and CEO, Marcos Sawaya Jank. He adds that World Trade Organization rules are developed for all products, including ethanol, so the idea that a specific product is somehow "outside the list" doesn't exist.

According to Jank, ethanol producers in Brazil expect to see significant cuts in ethanol tariffs. "We're not talking about quotas as some have been suggesting, but tariff cuts duly calculated using the formula already agreed to by negotiators. The formula should simply be applied and the new, reduced tariff, adopted," he said.

As is the case with all agricultural products, European and American tariffs imposed on imported ethanol will have to be reduced once the formula is applied. According to the WTO, tariffs between 20% and 50% (the range covering EU tariffs on ethanol) must be reduced 57% while tariffs between 50% and 75% (the range covering ethanol tariffs charged in the United States) should be cut by 64%. Five years after these cuts are implemented, the EU tariff should come down from 19.2 euros per hectolitre to 8.25 euros per hectolitre, while the American tariff should end up at 0.9% + 19.5 cents per gallon, down from 2.5% + 54 cents per gallon.

Jank considers tariff reductions the ideal option, but if negotiators in Geneva choose to classify ethanol as a sensitive product and conclude there is room to create new quotas, compensation will be necessary. "If the ministers decide to accept new sensitive products, we want compensation to be significant, far higher than the 1.75 billion litres per year that could be exported to Europe under a proposal mentioned by EU trade chief Peter Mandelson."

Specifically in the case of the United States, Jank repeated that full integration of ethanol as a product is expected, along with cuts to both tariffs that currently exist -- an "ad valorem" tax and a secondary tax.

According to Jank, to contain rising global commodity prices, it is essential to streamline global trade in ethanol. Ideally, this would spare major ethanol consuming countries with restricted production capacity, where ethanol production may compete with food production, from facing the types of problems that have surfaced in recent months. A reduction in both European and U.S. tariffs on imported ethanol will allow for greater imports by industrialized countries of ethanol produced from more efficient feedstocks, which would benefit developing nations that produce ethanol from such feedstocks while reducing dependence on fossil fuels and forcing down gasoline prices.

Marcos Jank will be in Geneva as of the morning of Saturday, July 26, to follow the final stages of the current set of Doha Round negotiations.

ABOUT UNICA:

The Brazilian Sugarcane Industry Association (UNICA) represents the top producers of sugar and ethanol in the country's South-Central region, especially the state of Sao Paulo, which accounts for about 50% of the country's sugarcane harvest and 60% of total ethanol production. UNICA develops position papers, statistics and specific research in support of Brazil's sugar, ethanol and bioelectricity sectors. In 2007, Brazil produced an estimated 487 million metric tons of sugarcane, which yielded 30.6 million tons of sugar and 22 billion liters of ethanol.

Adhemar Altieri

Corporate Communications

Brazilian Sugarcane Industry Association (UNICA)

Sao Paulo, Brazil

(5511) 3093-4949

(5511) 3812 1416 - fax

http://www.unica.com.br