Feinstein Questions Ethanol Tariff

Grassley says tariff on imported ethanol is WTO compliant.

Senator Diane Feinstein, D-Calif., has asked U.S. Trade Representative Susan Schwab to investigate whether the U.S. ethanol import tariff violates the rules of the World Trade Organization. Senator Chuck Grassley, R-Iowa, is sending a letter to Schwab emphasizing the compliance of the tariff with WTO rules.

"I think it is clear it's within our international legal obligations," Grassley says. "The tariff was accepted by consensus, and I want to emphasize by consensus, by members of the WTO, including Brazil at the conclusion of the Uruguay Round of WTO negotiations, going back at least 15 years."

Grassley says he strongly disagrees with Feinstein's position that the possibility of a Brazil challenge at the WTO should cause the U.S. to take unilateral action to lower the tariff.

"Not only is the U.S. ethanol tariff in its current form explicitly permitted under WTO rules, there are also many policy reasons for opposing the lower tariff," Grassley says. "The United States remains heavily reliant upon foreign energy sources and lowering the ethanol tariff would only make us more dependent upon imported energy and what difference does that make if that's oil or ethanol. We're still sending money overseas that we ought to be keeping in the United States."

Grassley also says that if Brazil wants to export more ethanol to the U.S., why aren't they sending more through the Caribbean Basin Initiative? That law, which goes back more than 20 years, gives them duty free access the U.S. for up to 7% of the U.S.'s ethanol production.

"Until Brazil takes full advantage of its ability to export ethanol duty-free to the United States, and that would be up to that 7%, I don't see why we should think about giving the Brazilians more generous treatment as Senator Feinstein would suggest in her letter," Grassley says.

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