Brazilian Ethanol Producers (who make ethanol from sugarcane) have lower product
ID: 1252409 • Letter: B
Question
Brazilian Ethanol Producers (who make ethanol from sugarcane) have lower production costs than U.S. producers. Indeed, even though it costs 16 cents per gallon to transport ethanol from Brazil to the U.S., which also imposes an import tariff of nearly 60 cents per gallon on Brazilian ethanol, the United States still imports millions of gallons of ethanol per year from Brazil. If Congress really cares about protecting the environment and reducing our reliance on foreign crude oil, why do you suppose we have a large import tariff on ethanol?Explanation / Answer
Reasons are as below - 1. Removing the Import tariff by USA will reduce domestic corn prices and negatively impact a growing U.S. industry. 2. It would also subsidize ethanol producers in countries like Brazil & will increase their income by exporting more Etahnol to USA. 3. The import tariff is designed to offset the tax incentive, US gasoline refiners receive for each gallon of ethanol they blend, no matter where the ethanol originates. Removing the tariff would mean ethanol producers in Brazil, for example, would have access to American taxpayer dollars 4. Lifting this tariff will not decrease the Gasoline prices in USA at the gasoline pump. However, eliminating the tariff will negatively impact a growing U.S. ethanol industry 5. It is estimated that removing the tariff would lower corn prices at least 6 cents per bushel for every 1 billion gallons of ethanol imported into the United States. That works out to about $666 million in lost income for U.S. farmers. 6. US is paying 51-cent per gallon blenders' tax credit to gasoline distributors on the imported ethanol. Hence it is costing US taxpayers $1.7 billion for every billion gallons of imported ethanol. 7. Another chain of thought is as US don't have enough ethanol in production today. SO if US were to temporarily reduce the tariff on ethanol coming into USA, It would ease the gasoline Prices in USA temprarily 8. Another negative impact of lifting the import tariff would mean Loss of americn jobs in the economy and the future of a growing ethanol industry both in Illinois and nationwide.