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Ethanol Trade between Brazil and the United States

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  • Devadoss, Stephen
  • Kuffel, Martin

Abstract

The United States has used tax credit and mandate to promote ethanol production. To offset the tax credit availed by the imported ethanol, the United States instituted an import tariff. This study ascertains the appropriate U.S. ethanol import tariff corresponding to the U.S. domestic policies by setting the policy-induced ethanol price equal to the free market price. The theoretical results from a horizontally-related ethanol-gasoline partial equilibrium model of three countries (the United States, Brazil, and the Rest of the World) show that the United States should provide an import subsidy rather than impose a tariff. The empirical results quantify that this import subsidy is $0.10, instead of a $0.57 import tariff, per gallon of ethanol.

Suggested Citation

  • Devadoss, Stephen & Kuffel, Martin, 2010. "Ethanol Trade between Brazil and the United States," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 60889, Agricultural and Applied Economics Association.
    • Handle: RePEc:ags:aaea10:60889
    DOI: 10.22004/ag.econ.60889
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    References listed on IDEAS

    as
    1. de Gorter Harry & Just David R, 2008. "The Economics of the U.S. Ethanol Import Tariff with a Blend Mandate and Tax Credit," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(2), pages 1-23, December.
    2. de Gorter, Harry & Just, David R. & Tan, Qinwen, 2009. "The Socially Optimal Import Tariff and Tax Credit for Ethanol with Farm Subsidies," Agricultural and Resource Economics Review, Cambridge University Press, vol. 38(1), pages 65-77, April.
    3. Harry de Gorter & David R. Just, 2008. "The Economics of a Blend Mandate for Biofuels," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 738-750.
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