Brazil should seek a tariff-free sugar quota agreement with the United States similar to the tariff-free ethanol quota it offers to U.S. exporters of the biofuel, the new head of Brazil’s powerful cane industry group Unica told Reuters.
Evandro Gussi, who took over last month as the head of Brazil’s main sugar and ethanol lobby, said in an interview that if a tariff-free sugar quota was not accepted, then Brazil should scrap the current system and tax all ethanol imports by a minimum 20 percent.
Gussi is a former congressman who authored the RenovaBio bill, new federal legislation to boost the use of biofuels that is expected to enter into force next year.
He appeared in a video shared among sugar millers late last year, during Brazil’s presidential campaign, with then candidate Jair Bolsonaro, who pledged in the message to speed up implementation of RenovaBio.
Brazil currently gives the United States a tariff-free quota of 600 million liters of ethanol per year, limited to 150 million liters per quarter. Volumes above that are taxed by 20 percent. That system ends in August. If not renewed, all imports will be taxed by 20 percent, the general Mercosur tariff.
By comparison, the United States taxes Brazilian ethanol by only 2.5 percent. A higher tariff of $0.54 per gallon was canceled back in 2011.
Gussi, who spoke to Reuters late on March, said he believed similar trade conditions should be extended to sugar, a key product for local mills.
“Our current, tax-free ethanol quota is six times larger than our tax-free quota to sell sugar to the U.S.,” he said. “I think the quotas should be equivalent.”
The United States already offers limited tariff-free sugar quotas, but volumes are very small considering the size of Brazil’s production, Gussi said.
Bolsonaro will meet with U.S. President Donald Trump next week in Washington and the two leaders are expected to discuss bilateral trade, among other issues.
Gussi said the government was aware of Unica’s position on sugar quotas.
The cane industry group has provided information to the government amid recent moves by Brasilia within the World Trade Organization to question sugar policies in countries such as India and China.
Gussi said he sees conditions improving for mills in coming years with the global sugar supplies swinging from a surplus to a deficit and the prospect for more ethanol use in Brazil.
“Investments will gradually return to the sector,” he said.