The US is in talks with Brazil to form an ethanol partnership that might include eliminating trade tariffs on the fuel, according to an article in USA Today. Together, the two countries produce 70% of the world’s ethanol; this partnership therefore represents a first step to formation of a global ethanol market. Reducing boundaries to global ethanol trade could potentially increase both US and Brazilian ethanol production, according to sources quoted in the article.
I am torn as to whether such a partnership is a good idea. Certainly, increased utilization of Brazilian ethanol will have positive implications for renewable fuel utilization and global warming mitigation. However, while the US uses corn as its ethanol feedstock, Brazil uses sugar cane, which is a more efficient precursor material. With a flattened playing field, the Brazilians will enjoy a decided advantage in ethanol production efficiency over the US (unless someone discovers the long-anticipated breakthrough required to make commercial quantities of cellulose-based ethanol).
My predication is that without protection from trade tariffs, US corn-based ethanol will always be undercut by sugar-based ethanol from Brazil. While partnership with Brazil might increase ethanol utilization in the US, it will also squash our domestic ethanol industries. Should the US come to rely upon ethanol instead of oil, a tariff-free global ethanol market will force us to cozy up to Brazil.
Personally, I think corn-based ethanol is stupid and deserves to be squashed. Plus, I feel a lot better about relying on Brazil to meet US energy needs than the Middle East. However, long-term stability in Latin America is still questionable, especially given attempts by Venezuelan President Hugo Chávez to undermine US policies in South America.
I just hope this new ethanol partnership does not culminate in some future US president sending troops to South America to protect the US energy interest in Brazilian sugar plantations.