Trying to Nail a Loophole Shut

9 July 2004

The Cargill-Brazilian Import saga continues. (Background post.) Sen. Chuck Grassley, R-Iowa, has introduced a bill into the senate that would close the loophole that Cargill is trying to use to import cheaper Brazilian ethanol without tariffs after processing it first in El Salvador.

Congressional sources say the legislation would be hard to approve on its own because it would reopen other aspects of the Caribbean Basin Initiative (CBI).

Cargill responded to complaints from the National Corn Growers Association about the reported El Salvador ethanol plan. In a letter to the organization, Cargill said it is the most widely invested participant in the U.S. corn industry today, as evidenced by its involvement in almost every aspect of the corn industry: grain elevators, export facilities, railcars and barges, ocean freight, wet milling, dry milling, ethanol, animal nutrition, crop inputs, fertilizer production, animal production and processing, and even corn-based plastics.

Cargill said it has invested $2 billion in U.S. fertilizer production, that it annually buys in excess of 1 billion bushels of corn from U.S. farmers, and in the last three years has invested more than $400 million in its corn processing operations.

Noe of which, as far as I can tell, actually addresses the issue of the El Salvador process.

Frankly, the entire energy field seems overly subsidized, protected, and so on. It’s too unwieldy and artificial.

Ethanol, for example, has been highly subsidized for 20 years—great for corn growers, and great for Cargill. But that political protection also extends to shielding the corn growers from the impact of less costly fuels (Brazilian ethanol). Good for corn growers, bad for Cargill. And bad, ultimately, for the market.

I don’t mean to pick just on ethanol. The enormous hydrocarbon industry benefits massively from subsidies—ultimately helping to keep your gas price artificially low. Idealistically, this would be a great time to take a look at ALL energy subsidies. Do a level set (zero them all out) and start over based on a strategic energy policy.