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WTO Rules China Gave Its Growers Unfair Wheat and Rice Subsidies

The Trump administration, with the weight of a WTO ruling behind it, called on China on Thursday to eliminate trade-distorting wheat and rice subsidies that cost U.S. farmers hundreds of millions of dollars a year in export sales. The WTO panel report may provide impetus to negotiations to resolve the Sino-U.S. trade war.

Still pending at the WTO is a companion U.S. complaint against Chinese controls on imports of corn, wheat, and rice. Both complaints were filed in the closing months of the Obama administration after farm groups and trade officials had spent years compiling evidence of trade violations. U.S. wheat groups, for example, said China set a support price of $10 a bushel for wheat for its farmers, far higher than the world price.

“China’s excessive support limits opportunities for U.S. farmers to export their world-class products to China,” said U.S. trade representative Robert Lighthizer. “We expect China to quickly come into compliance with its WTO obligations.”

Countries are given “a reasonable period of time” to comply with WTO rulings. If they do not, the winner can apply retaliatory tariffs on products from the offending nation.

When it turned to the WTO in September 2016, the U.S. said Chinese subsidies for domestic wheat, corn, and rice production in 2015 were $100 billion larger than the limits China accepted when it joined the WTO. The WTO dispute settlement panel, which began work in June 2017 after fruitless U.S.-China consultations, concluded that China’s wheat and rice supports exceeded the level allowed by world trade rules. China had pledged that its supports would not exceed 8.5% of the value of the crops. The WTO panel did not rule on corn because China changed its support system after the 2015 harvest, so the U.S. complaint was moot.

Lighthizer’s office said the WTO ruling was “a significant victory for U.S. agriculture that will help American farmers compete on a more level playing field.” China has 60 days to appeal the ruling.

“U.S. farmers have been hurt by China’s overproduction and protectionist measures for too long, and it’s past time for China to start living up to its commitments,” said Vince Peterson, head of U.S. Wheat Associates, an export promoter. China’s subsidies cost U.S. wheat growers up to $700 million a year by encouraging domestic production and depressing world wheat prices, said the group.

Trade group USA Rice said the WTO ruling could encourage other nations to reform excessive support programs. “With about half of our crop exported in any given year, these steps toward leveling the international playing field have enormous consequences for us,” said USA Rice Chairman Charley Mathews, a California grower.

“Today’s ruling is a huge win at a time when such wins are sorely needed,” said House Agriculture Chairman Collin Peterson, adding, “It’s also my hope that this ruling can help our negotiators reach a positive path forward to reopen trade with China and reclaim the markets that the trade war has cost our farmers.”

China used to be the No. 1 customer for U.S. ag exports, especially soybeans. It is forecast to be No. 5 this year due to retaliatory tariffs.

In December 2016, the U.S. followed up its complaint about China’s crop subsidies with a WTO complaint alleging China had unfairly manipulated its tariff system to limit imports of U.S. corn, wheat, and rice. Farmers lost $3.5 billion in sales, the complaint said, because of the “opaque and unpredictable management” of tariff-rate quotas, which allow a specified amount of a commodity to enter at reduced tariff rates. The end result was that China kept the volume of corn, wheat, and rice imports below the level that was supposed to be allowed to enter at the lower rates.

To read the WTO panel decision, click here.

Produced with FERN, non-profit reporting on food, agriculture, and environmental health.
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