The U.S. Grains Council, Renewable Fuels Association and Growth Energy have asked the incoming U.S. Trade Representative Robert Lighthizer, a former deputy U.S. Trade Representative under President Ronald Reagan, to "urgently address China's recent implementation of protectionist trade barriers that are shutting out U.S. exports of ethanol and distillers dried grains (DDGS)."
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% to 10.7%. In a final ruling last month, China increased its DDGS anti-dumping duty to 42.2% to 53.7% and its DDGS countervailing duty to 11.2% to 12%. Additionally, the tariffs on U.S. ethanol have increased from 5% to 30% to 40%.
"It is widely believed that raising these tariffs will put an immediate end to ethanol exports to China, erasing the significant progress our industry made in developing that market over the past several years," the groups wrote in a letter to President Trump. "[W]e respectfully ask that reform of these punitive ethanol tariff rates be included in any potential upcoming trade negotiations with China."
China has grown to be a top export market for U.S. DDGS. In 2015, the country imported 6.5 million metric tons of the ethanol co-product, worth $1.6 billion 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 worth more than $300 million were shipped to China last year.
As the letter explained, 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 summer 2016. DDGS prices are now about 40% lower than in June 2016.
“President Trump’s message of ‘America First’ with regard to trade policy resonated with the U.S. ethanol industry and farmers across the country,” said RFA President and CEO Bob Dinneen. “China’s growing demand for protein and renewable fuel has triggered significant investment to meet their needs. The sudden and unnecessary reversal in China’s trade policy, and the barriers to U.S. imports they have imposed, have jeopardized our industry and penalized Chinese consumers. They need to end. We look forward to working with the president and his administration to restore free and fair trade to the betterment of both.”
“The U.S. Grains Council has worked for 35 years in China to help promote export of U.S. grains and their products and, as importantly, the development of the Chinese agriculture sector. We value these partnerships, however several recent moves in China policy are concerning,” said Tom Sleight, USGC president and CEO.
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“Growth Energy is extremely disappointed with the decision by China to subject U.S. DDGS to anti-dumping and countervailing duties,” said Growth Energy CEO, Emily Skor. “While DDGS sales into other markets have partially offset the reduction in U.S. shipments to China, the economic loss to the industry and U.S. farmers is significant and underscores the uncertainty of China’s reliability as a trade partner. We will continue working with all parties on this important relationship and look forward to the opportunity of revisiting this decision in the future.”
Source: U.S. Grains Council, RFA, Growth Energy
The increase in tariffs on dried distillers grains is a major victory for China's fledging ethanol industry. China's domestic DDGS was found to suffer "substantial harm" due to subsidized U.S. imports. - Reuters