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Removing Distortions in the U.S. Ethanol Market: What Does It Imply for the United States and Brazil?
Author(s) -
Elobeid Amani,
Tokgoz Simla
Publication year - 2008
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2008.01158.x
Subject(s) - tariff , liberalization , international economics , economics , volatility (finance) , free trade , ethanol , agriculture , monetary economics , international trade , market economy , chemistry , financial economics , ecology , biology , organic chemistry
We analyze the impact of trade liberalization and removal of the federal tax credit in the United States on ethanol markets using a multimarket international ethanol model. We find that U.S. trade barriers have been effective in protecting the ethanol industry. Under current policy, there is separability of the U.S. ethanol market from world markets. With trade liberalization, the ethanol market deepens, making it less susceptible to price volatility. The effect of trade liberalization extends beyond ethanol markets, affecting agricultural markets. The results show that the impact of removal of the tax credit overrides the impact of the tariff removal.