Trading Biofuels —
Will International Trade Law Be a Constraint?¹

William A. Kerr
Van Vliet Professor, University of Saskatchewan, Saskatoon, Canada

Laura J. Loppacher
Research Associate, Estey Centre for Law and Economics in International Trade, Saskatoon, Canada

This paper was presented at the annual meeting of the Canadian Agricultural Economics Society (Halifax, June 2004) in a session entitled “Bio-Energy in North America: Problems, Policies and Potential”. Papers presented at CAES meetings are not subject to the journal’s standard refereeing process.

The Issue

Biofuels are increasingly being looked at to spur economic activity in the agricultural sector and to contribute to broader rural development goals while at the same time assisting in the reduction of harmful emissions created by burning petroleum-based fuels. Hence, biofuels appear to be a “ win-win” technology that will contribute to achieving a number of important policy goals. As a result, governments around the world have become actively involved in the promotion of this new industry. The industry has expanded rapidly in the last few years but is still in a developmental stage. As the industry matures, biofuel producers will begin to see opportunities in international markets. Canada and the United States have considerable export potential due to their large supply of biomass and technological capacity to convert the biomass into biofuel. This article examines the potential trade issues that could arise when biofuels enter the international market. The issues examined include subsidization, the trade effects of using biotechnology in producing biofuels, market access and tariff classification, and potential technical barriers to trade related to product standards.

Implications and Conclusions

Although there is significant economic potential in the biofuel industry, international trade law may be ill equipped to facilitate the international movement of this new and novel product. There is considerable potential for trade disputes to arise and costly delays to occur. As a result, market potential may be less than expected, and suboptimal levels of investment can be expected. The private sector needs to factor trade constraints into product development decisions. Governments and industry must work together to establish a coherent strategy to proactively address potential trade constraints before they become actual trade complaints. More research is needed to fully inform policy makers and private sector investors.

Endnote

1. Funding support from the Social Sciences and Humanities Research Council and BIOCAP Canada is gratefully acknowledged. [back]

The views expressed in this article are those of the author(s) and not those of Current Agriculture, Food & Resource Issues nor the Canadian Agricultural Economics Society.

© Copyright 2005 Current Agriculture, Food & Resource Issues

Suggested citation: Kerr, William A., and Laura J. Loppacher. 2005. Trading biofuels — Will international trade law be a constraint? Current Agriculture, Food & Resource Issues 6: 50-62. Retrieved [date] from http://www.CAFRI.org

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