Newly enacted tariffs put in place against ethanol plants in Illinois could be negatively impacting your bottom line. As it can every five years, the Chinese government chose to investigate U.S. DDGS exports to the Chinese market. Their resulting claim is that domestic Chinese producers cannot compete with what they call illegally supported, cheaply priced US DDGS. China then implemented tariffs against US ethanol producers, with two large volume Illinois ethanol plants taking the brunt of it.
Big River Energy, in Galva, and Marquis Energy in Hennepin have been specifically targeted by the Chinese with their tariffs, with the Illinois state sales tax on ethanol blends being used as a reason. In fact, Marquis Energy reports a $15-$20 per ton drop in the price of DDGS since the tariff was enacted. As the value of DDGS drops, so will the value of corn and the value of the local corn bid. That hits home for Illinois corn farmers.
Back to the tariff and the Illinois state sales tax on ethanol blends, the Chinese labeled it a market support mechanism, and that it helps prove their case. We cry foul. The lawyers will now have to figure it out. As an aside, the petroleum marketers and the American Petroleum Institute would be the strongest voices at the table to keep that tax incentive in place, knowing that it benefits them as the blenders, not the farmer or the ethanol plant.
In the meantime, exports are slowed and trade opportunities are compromised, all at the whim of China.
So how can these types of circumstances be better limited? How can China’s ability to tip the scales of fair trade be controlled?
We believe that part of the answer is trade agreements like the TPP, the Trans-Pacific partnership. IL Corn supports TPP and encourages our Congressional delegation to vote in favor of the pact as soon as there is an opportunity. We would also encourage our farmer members to call their Representative in the House and our two Senators and tell them to ratify the deal.
As former presidential candidate and Ohio Governor John Kasich wrote in an op-ed earlier this week, “While China and Russia — and dangerous client states such as North Korea and Iran — jockey to outmaneuver everyone else and gain a dominant hand for their global schemes, there are fast-growing, independent nations looking to partner with the United States and thereby bring their strategic, economic and political values into alignment with ours,” Kasich wrote.
He continued in the Washington Post op-ed, ”The last thing we need is for these thriving markets to come to believe they can’t count on U.S. support, pushing them instead into economic and geopolitical relationships with China or Russia. In the event of our inaction and loss of resolve, the United States will surrender global leadership to our most aggressive rivals, dictators who have the most to gain: Vladimir Putin, Russia’s latter-day Stalin; and Xi Jinping, the most repressive Communist Chinese leader since Mao Zedong.
We hope to see the TPP vote taken up in the lame duck session after the November 8 presidential election.
For more information about the TPP, take a look at this website: http://tpp.fb.org/