R.F.A. sheds light on existing U.S. ethanol provisions
2011-01-20 15:01:37
The Renewable Fuels Association defended the current ethanol provisions from claims by United States Republican senators John McCain and John Barrasso that the provisions do not adhere to World Trade Organization agreements.
The group, the national trade association for the United States ethanol industry, sent letters to the senators on Tuesday in response to their recent statements that the W.T.O. would decide against the Volumetric Ethanol Excise Tax Credit and Secondary Tariff on Imported Ethanol.
“We strongly disagree that this or any other part of the United States ethanol program is contrary to the W.T.O Agreement on Subsidies and Countervailing Measures Agreement or any other W.T.O. regulation,” R.F.A. said.
The association elaborated that the tax credit which grants gasoline refiners, blenders and dealers 45 cents of federal credit per gallon of ethanol they blend with gasoline, is market-based and paid to fuel blenders and marketers and not to ethanol producers.
This makes it difficult to prove that the tax credit is a subsidy with sufficient specificity or that the complaining country can adequately show its “serious prejudice” or “adverse effects,” which both would serve as basis of a W.T.O. challenge.
The tax credit is also said not to discriminate against foreign ethanol imports since it is equally available to both foreign and domestically-produced ethanol.
“If the credit is not shown to be an arbitrary or unjustifiable discrimination between countries, or a disguised restriction on international trade, it will likely survive any W.T.O. challenge,” the association said.
The association also clarified the secondary tariff is not a subsidy and does not go to ethanol producers but to the United States Treasury. Also, the association claimed the tariff ensures that United States tax payers are not subsidizing foreign ethanol producers.
Lastly, the secondary tariff is allegedly properly notified and scheduled in line with W.T.O. procedures, which gives countries the opportunity to review and give their opinion about it.
“But because no one did so, as long as the rate we charge is below the maximum rate listed in our W.T.O. schedule, we are within our rights to charge it,” the association added.
The association concludes that ethanol reportedly displaces gasoline produced from about 455 million barrels of oil and reduces consumer gasoline costs, improves trade balance and boosts national energy security.