April 19, 2010
The dangers of Brazilian ethanol (Milwaukee News Buzz)
The Wisconsin Bio-Industry Alliance is warning that if tariffs on ethanol imports expire, the state could lose a whopping 13,000 jobs and $2.4 billion over three years. Would lowering the barriers to Brazilian ethanol producers really be an economic gut-shot for the state?
The Alliance’s numbers come from a report by the University of Missouri’s Community Policy Analysis Center that says allowing the tariff to expire at the end of the year would drive down not just ethanol prices but also those for corn commodities through an influx of foreign competition.
But Matt Roberts, an associate professor of economics at Ohio State, says he wouldn’t expect the lifting of the tariff to have an immediate impact on the ethanol market. America’s only serious competitor, he says, would be Brazil. While America ranks first in production and consumption of ethanol, Brazil ranks second.
Roberts estimates it would take three to five years before Brazilian competition begins to put a serious dent in the American market, and then only in coastal areas, particularly on the East Coast, where the cost of delivering Brazilian ethanol would be lowest. In the Midwest, he says, locally-produced ethanol would still be king.
The Alliance says Wisconsin businesses and Gov. Jim Doyle have signed a petition supporting the extension of the tariff, which makes it harder for foreign ethanol makers to compete with American ones. Joshua Morby, executive director of the Alliance, plans to travel to Washington D.C. to lobby the Wisconsin Congressional delegation. “We hope Congress will take action to prevent these crippling job losses from occurring,” he says.
