Brazil’s duty hike sheds light on inequities
Earlier this week, Brazilian officials said they would raise import duties on over a hundred items in response to American cotton subsidies. The World Trade Organization, or WTO, allowed the action, which will raise the import tax on cars and trucks from 35% to 50%, and on non-hard wheat from 10% to 30%; overall, the WTO has allowed Brazil up to $829 million in retaliatory sanctions. Brazil and the US have around $46 billion in trade, going both ways, per year.
American policy allows for sharply different duties by other countries than those imposed on incoming goods. Cars imported to the U.S. have a 2.5% tariff, while pickups have a 25% tariff (unless they were made in Canada, Mexico, or a host of other, more minor nations); both cars and pickups exported to China have a 25% tariff, and China used to impose the same duties on car parts. South Korea’s auto tariff is 8%; Japan has none.
The United States can avoid the hike in Brazilian tariffs if it cuts cotton subsidies, which are currently $3 billion per year, within the next month.
Tariff policies can be bewildering to many people. As an example, the United States does not place one on imported oil, but it does on Brazilian ethanol (54 cents per gallon), which is made from sugar – and is otherwise cheaper than American corn-based ethanol. That is one reason why ethanol is far more popular in Brazil, where it powers 55% of vehicles, than in the US, where reliance on corn has led to high ethanol prices and high corn prices. Tariffs have generally been developed as the result of negotiations within the country, by power brokers, political contributors, and industry representatives, and between countries, one at a time. Franklin D. Roosevelt has been credited with starting a constant series of mutual tariff reduction talks with other countries, starting with bilateral agreements in the 1930s and talks through GATT after World War II; he greatly lowered import duties on a wide variety of items from the levels of the Hoover administration and earlier. As a result, practically any argument can be, and is, made regarding trade with the United States and other nations.
