FARGO, N.D. - Cargill's potential deal to import Brazilian ethanol into the United States is a sobering reminder that trade deals are two-way deals. That's the reaction of U.S. sugar industry analysis of recent reports that Cargill would use what critics call "loopholes" in trade laws to import some ethanol without tariffs.

Jack Roney, director of economic policy analysis for the American Sugar Alliance in Washington, says the development is "just another reminder" that trade deals are two-way.

"You also have to be concerned about additional access into the U.S. by foreign sugar and foreign ethanol," Roney says. "There may be export benefits (to FTAs). The question is, will they be offset with imports."

Deal announced

Earlier this month, Reuters reported that Minnetonka, Minn.-based Cargill is working on a deal to build an ethanol dehydration plant in El Salvador. This would convert Brazilian ethanol into fuel-grade ethanol for shipping into the United States.

El Salvador is one of 27 Caribbean Basin Initiative countries. Under CBI, ethanol imports can come into the United States tariff-free but capped at 7 percent of the U.S. ethanol production levels.

In 2003, U.S. ethanol production was 2.67 billion gallons, so CBI imports can be 186.9 million gallons. Because of increased U.S. ethanol production in 2004, the 2005 CBI imports could grow to 224 million gallons.

So-called "hydrous" ethanol typically is at 5 percent moisture. The Brazilians keep some water in their ethanol to aid in the pipeline transfer within the country. When shipped to El Salvador the water would "refined" out and shipped to the United States.

Brazil's benefits

The United States has a 130-billion-gallon fuel marketplace. About 2.4 percent of that is ethanol. Congress, in a stalled energy bill, has attempted to get a 5-billion-gallon requirement for renewable fuels, which could boost ethanol to 3 percent of annual use. To compare, Brazil uses ethanol in almost all of its fuel at a mandatory rate of 21 percent to 26 percent of total fuel, according to the U.S. ethanol industry. The Brazilian government subsidized sugar mill/ethanol refinery construction in the 1970s, 1980s and 1990s. Roney says the Brazilian sugar industry benefits by a those infrastructure investments to the tune of some $1 billion a year.

The National Corn Growers Association, which earlier had rejected some sugar industry analysis of the dangers to U.S. ethanol industry from the Central American Free Trade Agreement, is now criticizing Cargill's move.

Dee Vaughan, president of the National Corn Growers Association, wrote Cargill a letter, saying the El Salvador plan might be "legitimate and legal" but runs counter to U.S. laws that are "primarily responsible for the growth of the ethanol industry in the United States."

Cargill officials, for their part, say their company simply is "preparing to become more involved in the global ethanol trade."

View All News