CAFTA: Killing Iowa's Ethanol Industry
Just before the holiday break (I hope everyone enjoyed a relaxing and celebratory 4th!), the Senate passed their version of the Central American Free Trade Agreement. Iowa's vote went both ways.
Tom Harkin:
“Many
corporations will be tempted to take advantage of inadequate labor and
environmental standards and move jobs and investment outside the U.S.,”
Harkin said in a statement issued Thursday. “And more importantly,
family farms, rural communities and Iowa businesses will likely see
stiffer challenges under CAFTA.”
Chuck Grassley:
“Passage
sends a strong signal to our trading partners that the United States
remains engaged in Latin America and deeply committed to opening
markets globally,” Grassley said. “Farmers, ranchers, manufacturers,
and service providers in Iowa and nationwide will get a better trade
deal in CAFTA countries than what they have today.”
The
House Ways and Means committee approved a version of the measure as
well – led by Iowa congressman (and gubenatorial candidate) Jim Nussle:
Nussle
highlighted a two-decade trade inequity between the United States and
the CAFTA region, telling the Courier, “I'm glad we're at this point.
We're leveling a 20-year-old uneven playing field.” A
very similar situation played out before in the 1990s with the China
“Most Favored Nation” status and NAFTA. Looking back, we can all
see the results both of those agreements.
One extraordinarily important item that Messrs. Grassley and Nussle (and Harkin) seem to have ignored to this point: CAFTA will likely wipe out the growing ethanol industry in Iowa and the midwest.
Agribusinesses
– primarily Cargill – have been not-so-quietly investing in facilities
to process ethanol using cheaper South American (and Central American)
crops for import into the United States. The National Corn Growers Association filed a letter of complaint last year:
In
a letter sent this week to Cargill Corporation, the National Corn
Growers Association (NCGA) strongly condemned plans by Cargill
Corporation to import Brazilian ethanol through El Salvador as a means
of circumventing U.S. tariffs on imported ethanol.
Cargill
reportedly has plans to build a dehydration plant in El Salvador that
will convert ethanol from Brazil into fuel grade ethanol. Under
Caribbean Basin Initiative (CBI) provisions, the refined ethanol may
then be sent to the United States duty-free.
If CAFTA passes as is, the few restrictions on the import of ethanol will likely vanish – hardly a “slam dunk” for Iowa farmers.
The Institute for Agriculture and Trade Policy has published several fact sheets and reports detailing the impact CAFTA will have on America's slowly growing ethanol industry.
This fact sheet states the case very cleanly where the lines are drawn:
The
largest beneficiaries of CAFTA's ethanol provisions will be
agribusiness corporations in Brazil, a country that already has a
well-established ethanol industry. Unlike
much of the farmer-owned ethanol production in the U.S., international
agribusiness giants control the ethanol development in Central American
countries.
It's
plain as day: the interests of international agribusinesses and
the American producer are on opposite sides of this issue. Whose
voice is being heard in Washington?
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