China’s recent protectionist barriers imposed on U.S. ethanol and dried distillers grain (DDG) exports are exacerbating a completely unacceptable trade deficit with that country, Renewable Fuels Association (RFA) President and CEO Bob Dinneen told a U.S. Department of Commerce hearing this afternoon.
The public hearing was held to allow the U.S. Department of Commerce and the U.S. Trade Representative to respond to President Trump’s recent Executive Order concerning significant trade deficits.
“The U.S. economy is currently being weighed down by a $734 billion trade deficit,” said Dinneen. “347 billion of that, or roughly 50%, is from one country—China. Biofuels like ethanol represent one potentially bright spot to lessen that deficit. U.S.-produced ethanol is the lowest-cost and cleanest-burning source of octane on the planet. In 2016, the U.S. ethanol industry exported 1.1 billion gallons of ethanol, valued at more than $2 billion and 11.5 million metric tons of distillers’ feed valued at $2.1 billion. That’s why China’s recent action to curtail ethanol and feed imports from the U.S. is so troubling.”
In September 2016, after a nine-month investigation, China imposed a preliminary anti-dumping duty of 33.8% against U.S. DDGS and a countervailing duty of 10% – 10.7%. In a final ruling in January, China increased its DDGS anti-dumping duty to 42.2% – 53.7% and its DDGS countervailing duty to 11.2% – 12%. Additionally, the tariffs on U.S. ethanol have increased from 5% to 30% – 40%.
Prior to China’s latest actions, the country had been a top export market for U.S. DDGS and ethanol. In 2015, the country imported 6.5 million metric tons of the ethanol co-product and accounting for 51% of total U.S. DDGS exports. By the end of 2016, China had become the U.S. ethanol industry’s third-largest export market, receiving nearly 20% of total exports. Nearly 200 million gallons of ethanol was shipped to China last year.
However, China’s recent actions have contributed to lower prices for ethanol and DDGS. Ethanol prices have fallen 15% since mid-December 2016, while DDGS prices have fallen steadily since the summer of 2016. Today, DDGS prices are approximately 40% lower than in June 2016.
“China’s recent anti-dumping and countervailing tariffs on ethanol and DDGS are significantly injuring U.S. ethanol producers and farmers, and undermining the substantial investments our industries have made in developing a trade relationship with the country,” Dinneen noted. “Moreover, by unfairly blocking imports of the lowest cost octane source, the most immediate victims are Chinese consumers who have to pay more for gasoline.
“However, the RFA is encouraged by the Department of Commerce’s commitment to addressing this issue as evident by today’s hearing, by President Trump’s commitment to put America first when it comes to trade and by the nomination of Iowa Governor Terry Branstad to be U.S. Ambassador to China, whose knowledge of agriculture generally and ethanol specifically should help educate Chinese policymakers of the benefit of increased biofuels imports,” Dinneen added.