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Farm and Food: Prepare for big ethanol imports under free-trade agreements
By ALAN GUEBERT/Farm and Food Columnist

The harder anyone scratches the Central American Free Trade Agreement pushed by the White House, the worse the smell in American agriculture gets.



First, it was the creeping expansion of sugar exports to the U.S.

Next, it was the time — years, even decades — before U.S. farmers receive duty-free, total access to the tiny, poor Central American countries included in the agreement.

Now it's a threat to American agriculture's shiny, new star, ethanol.

According to a June 22 report issued by the Institute of Agriculture and Trade Policy, the Central American agreement virtually guarantees a rising tide of duty-free ethanol exports from Caribbean and South American nations to the U.S.

A whiff of that plan arrived a year ago when Cargill, Inc., the $63 billion agbiz giant, announced plans to use a little-noticed clause in the Caribbean Basin Initiative to ship sugar-based, Brazilian ethanol into El Salvador for dehydration, then export to the U.S.

Under that initiative, up to 7 percent of total annual U.S. ethanol production — made from a "foreign feedstock, i.e. sugar from another, non-CBI country," notes the instittute's report — can be exported to the U.S. duty-free if it is produced in any of the 24 nations covered by the Caribbean Basin Initiative.

Years ago that 7 percent was a drop in the ethanol bucket.

Now, however, with the ethanol market booming in the U.S. — and Congress likely to require the use of 8 billion gallons annually, or more than double today's production, by 2012 — the bucket will overflow.

Under the Caribbean initiative, almost 240 million gallons of Caribbean-sourced ethanol can enter the U.S. tariff-free in 2005; 560 million gallons in 2012 if the pending energy bill includes the 8-billion-gallon mandate.

Then, according to the Institute of Agriculture and Trade Policy, once that threshold is hit, the Caribbean initiative allows "an additional 35 million gallons (to) be imported into the U.S. duty-free, provided that at least 30 percent of the ethanol is derived from 'local,' or Caribbean region, feedstocks."

Yep, sugar.

After those two targets are hit, more Caribbean ethanol can be imported. "Anything above the additional 35 million gallons is duty-free if at least 50 percent of the ethanol is derived from local feedstocks," the report explains.

Gee, more imported sugar, er, ethanol.

And that's exactly will happen under the Central American Free Trade Agreement, explains the institute's report (at www.iatp.org), because "CAFTA adopts the CBI language for ethanol"... and "makes the CBI allowances on ethanol exports to the U.S. permanent."

As smelly as that will be for the farmers who grew the 1.26 billion bushels of corn used to make 3.4 billion gallons of American ethanol in 2004 — and who now own 40 percent of the domestic ethanol production capacity — it may get worse.

U.S. Trade Representative Robert Portman calls the Central American agreement a "gateway" that opens the door to the Bush Administration's bigger, hemisphere-wide Free Trade Area of the Americas.

In effect, the CBI-to-CAFTA-to-FTAA triple play would open the U.S. biofuels market to ethanol giant Brazil which, in 2003, produced 3.6 billion gallons of ethanol from sugar. It's a maneuver that free-trading agribusiness masters like Cargill appear to be banking on.

In May 2004, Cargill announced a $10 million partnership to build a 63 million gallon ethanol dehydration plant in El Salvador to export Brazilian sugar-based ethanol into the U.S. duty-free under the Caribeean Basin Initiative.

In Dec. 2004, Cargill and Brazilian commodities trader Coimex struck a deal to drop another $10 million in a Jamaican ethanol plant to, again, dehydrate Brazilian ethanol.

On May 19, 2005, Cargill announced it would invest in one of Brazil's biggest sugar processors, a producer of about 50 million gallons of ethanol.

The Renewable Fuels Assoc., ethanol's Washington, D.C. lobby, objects to the Institute of Agricultural and Trade Policy's assertion that the Central American agreement means greater ethanol imports. "They're allowed under (the Caribbean initiative) already," says spokesman Monte Shaw.

OK, so why institutionalize what could be a flood of imported ethanol with the Central American agreement and the Free Trade Agreement of the Americas.

On second thought, ask your local National Corn Grower Association director, your county Farm Bureau president or the American Soybean Association — all supporters of the Central American agreement and the Free Trade Agreement of the Americas — why America needs to import any ethanol at all.
 
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