A World Trade Organization dispute settlement panel Feb. 28 found China has provided trade distorting domestic support to its grain producers well in excess of its commitments under WTO rules.
China’s market price support policy artificially raises Chinese prices for grains above market levels, creating incentives for increased Chinese production of agricultural products and reduced imports, the panel found.
In December 2016, USTR requested that WTO establish a dispute settlement panel to consider whether China provides “market price support” for Indica (long-grain) rice, Japonica (short- and medium-grain) rice, wheat, and corn in excess of China’s domestic support commitments.
Market price support programs are some of the most trade-distorting agricultural policies, and are therefore subject to clear limits under the WTO Agreement on Agriculture and a WTO Member’s specific commitments. Under WTO rules, China may provide non-exempt support up to the de minimis level of 8.5 percent of the value of total production of a particular commodity, a commitment set out in China’s WTO accession agreement.
The panel report agreed with the United States that China provided domestic support to its agricultural producers in 2012, 2013, 2014 and 2015, well in excess of its WTO commitments. Specifically, the panel found that China had provided support in excess of permitted levels for Indica (long-grain) rice, Japonica (short- and medium-grain) rice and wheat, in every year.
Each finding individually established that China broke its overall agricultural domestic support commitment for agricultural producers. For corn, the panel declined to make findings on the support provided to corn in 2012-2015 given that China had apparently changed its program in 2016, just prior to the WTO’s establishment of the panel.
“This panel report is a significant victory for U.S. agriculture that will help American farmers compete on a more level playing field,” the statement said. “This dispute is the first to challenge China’s agricultural policies that disregard WTO rules and shows that the United States will take whatever steps are necessary to enforce the rules and ensure free and fair trade for U.S. farmers, ranchers, workers, and businesses.”
Lighthizer said, “The United States proved that China for years provided government support for its grain producers far in excess of the levels China agreed to when it joined the WTO. China’s excessive support limits opportunities for U.S. farmers to export their world-class products to China. We expect China to quickly come into compliance with its WTO obligations.”
Added Perdue, “We know that America’s farmers and ranchers thrive in a market-oriented, rules-based global economy. That means all countries must play by the rules, which is why this finding is so important to U.S. agriculture.”
Compliance with WTO rules will lead to a reduction in the excessive support provided to China’s grains producers and should increase market forces in China, leading to a more level playing field.
Members of Congress reacted favorably to the announcement.
“I am pleased the U.S. Trade Representative’s efforts to stand up for American producers have been successful. We play by international trade rules and must ensure other nations do too,” Senate Agriculture Committee Chairman Pat Roberts, R-KS, said.
“Especially now, our farmers and ranchers need greater access to new and growing markets. This action will allow them to better compete in China.”
House Agriculture Committee Chairman Collin Peterson, D-MN, said, “I’m very pleased that the WTO has ruled in favor of our farmers. Today’s ruling is a huge win at a time when such wins are sorely needed.
“It should enable a fairer playing field and allow our farmers to focus on farming. I hope the panel will issue a similar ruling on Chinese corn subsidies, but 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.”
House Agriculture Committee Ranking Member Mike Conaway, R-TX, said, “If there is any lingering doubt as to why the United States needs strong farm policy, this WTO ruling removes that doubt. China illegally subsidized just three crops to the tune of $100 billion in a single year, more than the entire U.S. farm safety net costs over the life of the farm bill.
“I commend President Trump for being vigilant in insisting that other countries live by the same rules we do in the United States. Free trade does not exist without everyone playing by the same rules. I especially want to thank Ambassador Lighthizer and Secretary Perdue for their extraordinary work to ensure a win for the American farmer and rancher in the WTO.”
The news of the WTO finding came shortly before President Donald Trump said he asked China to remove its tariffs on U.S. farm products such as pork and beef.
Sign up for HPJ Insights
Our weekly newsletter delivers the latest news straight to your inbox including breaking news, our exclusive columns and much more.
Trump tweeted that removing the tariffs “is very important for our great farmers—and me!”
In July, the Trump administration gradually began slapping import taxes on Chinese goods to pressure Beijing into changing policies that hobble foreign competition and threaten U.S. technology.
Trump doesn’t mention that the Chinese-imposed tariffs are in retaliation for the actions he took.
The U.S. and China are trying to work out their differences. Trump says he is asking China to immediately remove its tariffs on farm goods because the trade talks “are moving along nicely” and because he didn’t go through with a planned March tariff increase on $200 billion of Chinese imports.
Larry Dreiling can be reached at 785-628-1117 or [email protected].