Brazil

Let Ethanol Tax Credit and Tariff Expire — Congress “Can Do Good Just by Doing Nothing”

by Fran Smith on December 3, 2010 · 2 comments

in Agriculture, Energy, Ethanol

CEI colleague Marlo Lewis skewers the ethanol tax credit and the tariff, due to expire at year-end.  Lewis points out that letting the 45¢ per gallon Volumetric Ethanol Excise Tax Credit (VEETC) and the 54¢ per gallon tariff on imported ethanol expire would help cut the deficit by $25-30 billion over the next five years.  He notes that besides these taxpayer costs, with the tariffs on less expensive ethanol imports – from Brazil, for example — consumers pay more at the pump, and, with the diversion to growing corn for fuel instead of food, consumers also find their food costs rising.

Here’s his hard-hitting conclusion:

Defenders of the statist quo claim that ending the tax credit and tariff will eliminate more than 100,000 jobs. That is sheer hype. As already noted, ethanol production is chiefly determined by the mandate, which is not scheduled to expire. The Iowa State study indicates that the U.S. corn ethanol industry would lose about 1,000 jobs over the next five years. A $30 billion subsidy to save 1,000 jobs is too high a high price to pay.

The ethanol lobby likes to portray itself as an infant industry in need of special protection – a valiant little David challenging the Goliath of Big Oil. In reality, the U.S. ethanol industry is the world’s biggest and governments at all levels have been subsidizing it for decades. Enough is enough.

The November elections were a sharp rebuke to arrogance and fiscal irresponsibility in the nation’s capital. If the lame-duck Congress got the message, they’ll let the VEETC and tariff tumble into history’s dustbin. They can do good just by doing nothing – surely there’s a lesson in that too.

Ignorant Food Snobbery: Judge Orders McDonald’s to Pay Obese Employee $17,500

by Hans Bader on October 29, 2010

in Health and Illness, Legal, Nanny State, Personal Liberty

From The New York Times:

A Brazilian court ruled this week that McDonald’s must pay a former franchise manager $17,500 because he gained 65 pounds (30 kilograms) while working there for a dozen years.  The 32-year-old man said he felt forced to sample the food each day to ensure quality standards remained high . . .The man also said the company offered free lunches to employees, adding to his caloric intake while on the job.

This is sheer idiocy. McDonald’s does not make people fat. I lost 10 pounds while working at McDonalds for a summer. McDonald’s food is not any fattier than the food served by many other restaurants. The foie gras served in fancy restaurants is much fattier than hamburgers.  Quiche Lorraine is also fattier than a hamburger.  Food snobs may not like proletarian food like hamburgers, but then, I am indifferent to foie gras, which tastes a lot like canned dog food to me. Should I be able to keep food snobs from eating foie gras, just because it’s very fatty? (Ironically enough, my wife is French, so I’ve been exposed to foie gras a lot.)

There is now a big movement afoot to tax fast food in the pursuit of mythical public health benefits. The government is also moving to restrict the salt content of food, which could lead to increased obesity rates, more heart attacks, and “higher death rates among some individuals,” and make it harder to market low-fat foods.

U.S. avoids Brazil’s retaliatory tariffs — for now

by Fran Smith on April 7, 2010

in Agriculture, International, Trade

With Brazil poised to retaliate against the U.S. for its cotton subsidies that were deemed unfair by the World Trade Organization, the two countries announced on April 6 that they had reached an agreement to forestall Brazil’s announced actions to slap tariffs on about 100 U.S. products imported by Brazil, including several products relating to intellectual property.  The tariffs and countermeasures were to go into effect today.

In making the announcement U.S. Trade Representative Ron Kirk and U.S. Secretary of Agriculture Tom Vilsack said that the agreement takes steps to recompense Brazil  over the shorter-term while continuing discussions regarding how to eventually resolve the cotton dispute through further negotiation and the 2012 Farm Bill.  Under the WTO’s finding in the cotton dispute brought by Brazil, that country was entitled to impose about $820 million in countermeasures.

The USTR press announcement detailed that the U.S. will establish a fund of approximately $147.3 million per year on a pro rata basis to provide Brazil with technical assistance and capacity building.  The U.S. will also modify its Export Credit Guarantee Program, and make a risk-based determination whether fresh beef can be imported from Brazil while preventing the introduction of foot-and-mouth disease in the U.S.

One can only hope that the fix the U.S. found itself in as a result of giving in to cotton producers and other special interests in the 2008 Farm Bill will make policymakers realize that providing subsidies and hand-outs to special groups can be costly for other producers and consumers.  But don’t bet on that.  Farm bills are one of the worst examples of bi-partisan lawmaking, with politicians ever ready to provide  pork for their farm constituents – with taxpayer money that they think of as their own.

Regulation of the Day 112: Importing Pork Rinds

by Ryan Young on February 8, 2010

in Health and Illness, Regulation, Regulation of the Day, Trade

The federal government is loosening its restrictions on importing pork rinds from Brazil. Rudolph Foods, Inc., an Ohio company, owns a factory in Brazil, and stands to benefit from the ruling.

Competitors are up in arms. Citing exotic illnesses like foot-and-mouth disease, one competitor told The Wall Street Journal, “It just takes one pig” that is infected to spread a disease… “The risk is low, but the consequences are really high.”

If that is his strongest argument, then the case against liberalization is as weak as it gets. Instead of using the power of government to hobble its rivals, this company should go out and improve its product. Make its pork rind recipe even tastier. And cheaper. Use the import liberalization to its own advantage if possible.

LibertyWeek 63: Suing the Government into Honesty

by Richard Morrison on October 5, 2009

in CEI Projects, Features, Podcast, Zeitgeist

Your host Richard Morrison welcomes guest co-host Jeremy Lott and Editorial Director Ivan Osorio for Episode 63 of the LibertyWeek podcast. We start with CEI’s FOIA fight with the U.S. Treasury, 7-Eleven’s attempt to give consumers a big gulp of government and the solution to a jobless recovery. We then move on to union pension politics, Ireland’s regrettable embrace of EU hegemony and some scantily-clad Olympic News.

Does the ethanol mandate increase CO2 emissions?

by Marlo Lewis on May 27, 2009

in Ethanol, Global Warming, Odds & Ends

That may seem counter-intuitive, because burning ethanol merely puts back into the air the carbon dioxide (CO2) that corn crops recently pulled out of it, whereas burning gasoline liberates carbon that had been stored in geologic deposits for millions of years.

But other factors come into play, such as the fossil energy inputs required to produce the corn, turn it into ethanol, and deliver the ethanol to market. 

In addition, as EPA argues in its proposed rule to implement the renewable fuel standard program established by the 2007 Energy Independence and Security Act (EISA), expanding corn production into forest and grass lands can release substantial amounts of carbon stored in soils and trees.

Similarly, when U.S. farmers grow corn in areas previously used to produce soy beans, for example, farmers in Brazil have an incentive to convert forest land into soy plantations.

As you might expect, EPA’s use of life-cycle analysis, although required by EISA, drives the ethanol lobby and its congressional allies up the wall. They claim it is ridiculous to link increased corn production here to increased CO2 emissions in developing countries.

But, as my colleague, agricultural commodity analyst Dave Juday, demonstrates, the numbers paint a very clear picture. With Dave’s permission, I reproduce below an email he sent around earlier today.

*  *  *

With regard to GHG and the EPA’s RFS [renewable fuel standard] 2 rule, … the concept of “indirect land use changes” (ILUC) get criticized for being faulty, but it actually is pretty sound.  

Consider, if ethanol drives up US corn  plantings (which it did) and drives down US soybean plantings and production (which it did, because the US – the largest producer and exporter – has only so much farm land and not much tillable acreage to expand) and thereby raises the world price of soybeans, it raises the incentives to grow soybeans elsewhere in the world.  It just so happens Brazil – which is the world’s second largest producer and exporter – is the most likely place where additional soybeans will be grown on virgin land because that is where the virgin land is. 

The real weak link in this GHG lifecycle emissions concept is the ability to measure and value the carbon emissions and sequestration and the process by which “value” gets assigned to practices and manufacturing processes.  Yet, as might be expected from ethanol advocates, it is the simple, fundamental, and rational economic concept that is argued against.    Consider the perspectives shared by a lobbyist and a US Senator on the issue of “indirect land use changes” driven by US biofuel policy:

  •  Basically, the EPA has determined that the production of ethanol in America is forcing land use changes in Brazil and other foreign countries to destroy their valuable rain forests to produce farm commodities to make up for reduced exports of these commodities from the United States. Mr. Chairman, I have been in Washington for a long time, but I have never heard of a more bizarre concept. – Tom Buis, CEO, Growth Energy
  •  Every chance I get, I’m going to bring this issue up. It’s so obvious that the EPA’s rationale doesn’t meet the common sense test.  It’s ridiculous to think that Brazilian farmers are looking to see what Iowa farmers are doing to determine how they run their own business, and quite frankly it’s plain unfair to farmers. –  Honorable Charles Grassley, US Senator (R-IA)

Addressing these comments above is one of those cases where a picture is indeed worth 1,000 words:

corn-and-soy-us-and-brazil

SOURCE: USDA, Foreign Agricultural Service: Production, Supply, and Distribution Online

Added: May 29, 2009

Lisa Lerer delves into the ”life cycle analysis” controversy in the May 26 issue of Politico.  Farm state Democrats are threatening to oppose the Waxman-Markey bill if, as required by EISA, EPA considers the indirect impacts on land-use changes abroad when determining the life-cycle CO2 emissions of domestic ethanol production. 

The same lawmakers enthusiastically supported the EISA renewable fuel program as a global warming policy when they thought it would rig the market in favor of corn farmers. Now they’re threatening to derail Obama’s cap-and-trade initiative if EPA follows the law they helped enact. 

Obama campaigned on a platform of CHANGE, but he may find that in Washington still, Pork Rules and Corn Is King.