I’m sure many of my readers know the old proverb, “Love will find a way“. That may or may not be true . . . but money usually does, too, and probably much more reliably than love. If someone wants something badly enough to pay the costs involved, someone else will find a way to supply it, irrespective of laws, natural obstacles and any other barriers. (Witness the trade in illegal drugs, which flourishes despite literally tens of billions of dollars spent fighting it each and every year.)
In that light, I was amused to read an account of how US ethanol is still being sold in China free of tariffs, despite nominally crippling import duties.
Although China slapped retaliatory tariffs up to 70 percent on U.S. ethanol shipments, the fuel can still legally enter China tariff-free if it arrives blended with at least 40 percent Asian-produced fuel, according to trade rules established between China and the Association of Southeast Asian Nations (ASEAN), the regional economic and political body.
In a striking example of how global commodity markets respond to government policies blocking free trade, some 88,000 tonnes of U.S. ethanol landed on Malaysian shores through November of last year – all since June, shortly after China hiked its tax on U.S. shipments. The surge follows years of negligible imports of U.S. ethanol to Malaysia.
In turn, Malaysia has exported 69,000 tonnes of ethanol to China, the first time the nation has been an exporter of the fuel in at least three years, according to Chinese import data.
Blending U.S. and Asian ethanol for the Chinese market undermines the intent of Beijing’s tariffs and helps struggling American ethanol producers by keeping a path open to a major export market that would otherwise be closed.
“Global commodity markets are incredibly creative in finding ways to ensure willing sellers are able to meet the demands of willing buyers,” Geoff Cooper, head of the Renewable Fuels Association, said in a statement to Reuters. The group represents U.S. ethanol producers.
. . .
Malaysia has no track record of significant domestic ethanol production, so it is unclear where the ethanol blended with the U.S. product originates.
There’s more at the link.
I don’t know where the “Malaysian” ethanol is coming from, but it wouldn’t surprise me to learn that it was also from US sources. Import and export certifications can always be “arranged”, with the help of a few greased palms. (Nor should we feel smug about US businessmen getting one over on China. I’ll lay long odds that Chinese companies are doing the same with their exports to the USA, one way or another. It’s a universal phenomenon.)
I lived in South Africa during the period when economic and military sanctions were at their most swingeing, from the late 1970’s through to the early 1990’s. They exacted an economic toll, to be sure; but they didn’t stop most really important necessities from being imported or “substituted”. A few examples:
- For a particular item of military equipment, a miniature electronic component was needed that was unobtainable through normal sources, because its military application was well-known. However, a certain Far Eastern watch company made a wristwatch that contained an almost identical component, applied to a different purpose. As a result, South Africa rapidly became the single largest market for that model of wristwatch in the entire world, importing them by the thousands. They were all opened up, the needed component removed, and the rest scrapped without further ado. It was a little more expensive than buying the component itself, but not much more.
- A number of South African military and research establishments needed access to computer equipment to conduct their work, but sanctions made it very difficult to obtain this through normal commercial sources. Undaunted, a South African company began importing “spares” for DEC PDP-11 minicomputers. This rapidly turned into a worldwide hunt for the necessary parts, as well as manufacturing some locally and having others “pirated” in Far Eastern factories that turned a blind eye to the illegality of the procedure – provided they were paid in gold or hard currency. I understand that several hundred of these computers were produced, by the simple expedient of assembling parts acquired from all those sources. They became crucial elements of South Africa’s national security data processing infrastructure.
- High-precision industrial controllers could still be exported to South Africa under sanctions, for use in industry. I found it interesting that a well-known West German brand of “industrial controller” was clearly visible (albeit carefully relabeled) in the fire control system of locally developed armored vehicles. Since the same German firm happened to manufacture both industrial controllers and military fire control systems, it was obvious that the housing of one device had been used to conceal electronic innards from the other. Nobody turned a hair.
Where there’s a will, and money to be made, there’s always a way.