U.S. files WTO complaint against China over rice, wheat, corn subsidies
September 15, 2016
The Office of the U.S. Trade Representative today has filed a complaint against China in the World Trade Organization over China's use of "market price supports" for rice, wheat and corn.
The complaint alleges that China is using these market price supports "in excess of China's commitments under WTO rules," USTR said in a news release that was embargoed until now.
Trade Representative Michael Froman is also holding a news conference at USDA headquarters with Agriculture Secretary Tom Vilsack.
They are scheduled to be joined by Senate Agriculture Committee Chairman Pat Roberts, R-Kan., Senate Agriculture ranking member Debbie Stabenow, D-Mich., Sen. Heidi Heitkamp, D-N.D., House Agriculture Committee Chairman Michael Conaway, R-Texas, House Agriculture ranking member Collin Peterson, D-Minn., House Ways and Means Committee Chairman Kevin Brady, R-Texas, and Rep. Adrian Smith, R-Neb., a member of Ways and Means and chair of the Modern Agriculture Caucus.
USTR said in the news release that, in 2015, China's "market price support" for corn, wheat and rice is estimated to be nearly $100 billion in excess of the levels China committed to during its accession to the WTO. China's excessive market price support for rice, wheat, and corn inflates Chinese prices above market levels, creating artificial government incentives for Chinese farmers to increase production, USTR said.
USTR's decision to file the complaint is a victory for the rice, wheat and corn groups that have been raising the issue of subsidies by Chinese and other developing countries for the last several years. The groups hired DTB Associates, a consulting firm, to document the subsidies.
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The developing countries' subsidies were also a reason that farm groups discouraged the Obama administration from moving forward with the Doha Round of trade negotiations unless those subsidies were addressed. Those countries have opposed that idea, and the Doha Round was essentially shut down after a WTO meeting of trade ministers in Nairobi in December.
The complaint will result in a series of WTO-directed negotiations with China over the level of alleged excessive subsidies. If the United States prevails in the case, China would have the choice the reducing the subsidies or dealing with U.S.-imposed punitive tariffs on its products. The process is likely to take several years.
USTR noted in its release that since President Barack Obama was inaugurated in 2009, USTR has filed 23 enforcement complaints at the WTO — more than any other WTO member — and has won every one that has been decided by the WTO so far.
Of today's complaint, Froman said, "These programs distort Chinese prices, undercut American farmers, and clearly break the limits China committed to when they joined the WTO."
"As this administration has consistently and repeatedly shown, we will not stand by when our trading partners fail to follow the rules like everyone else," he said. "We will aggressively pursue this challenge on behalf of American farmers and hold the Chinese government accountable to the standards of fair global trade."
Vilsack was careful to point out that U.S. exports to China have grown but that grain exports cannot compete on a level playing field.
"Through tariff cuts and the removal of other trade barriers, China has gone from a $2 billion-a-year market for U.S. agricultural products to a $20 billion-plus market," Vilsack said.
"But we could be doing much better, particularly if our grain exports could compete in China on a level playing field. Unfortunately, China's price supports have encouraged wheat, corn and rice production in China that has displaced imports," Vilsack said.
"When China joined the WTO, it committed to limit this kind of trade-distorting support, which it has failed to do. This has resulted in significant losses to American producers. We see substantial opportunities to meet import demand for grains in China if China is willing to operate a WTO-consistent trade regime."
USTR said that, according to its analysis, "China appears to provide agricultural domestic support to Indica rice (long grain), Japonica rice (short and medium grain), wheat, and corn in excess of its Aggregate Measurement of Support (AMS) commitments under the WTO Agreement on Agriculture (Agriculture Agreement).
USTR said China announces on an annual basis the minimum prices at which the government will purchase those commodities in major producing provinces during the harvest season. "Through this program, China has maintained domestic prices at levels above world market levels since 2012, influencing domestic production decisions and distorting the Chinese market."
USTR continued, "China appears to have breached its WTO Agriculture Agreement commitment not to provide support in favor of domestic producers in excess of the commitment levels provided in its WTO Schedule."
"China committed through its WTO schedule not to provide trade-distorting domestic support, except for domestic support at or below a de minimis level of 8.5 percent for each agricultural product. China, however, has provided domestic support for each product — Indica rice, Japonica rice, wheat, and corn — substantially above the 8.5 percent de minimis level. In fact, in 2015, the level of support provided through these programs in excess of China's commitment was nearly $100 billion."
USTR noted that together, U.S. rice, wheat and corn exports average $20 billion per year, contribute an estimated $70 billion to the United States economy every year, and support 200,000 American jobs.
With polls showing the proposed Trans Pacific Partnership agreement unpopular with voters, USTR is under tremendous pressure to prove that it is enforcing U.S. trade laws.
In the news release, USTR pointed out that the grains complaint is the 14th that USTR has brought against China during the Obama administration and the 23rd WTO action against all countries.
"It demonstrates the Obama administration's ongoing commitment to ensuring China abides by its WTO obligations, and to strictly enforcing the trade agreements that protect the interests of American farmers, workers, and businesses," USTR said.
"The administration has taken, and will continue to take, all steps necessary to ensure American farmers, workers, and businesses can compete and win on a level playing field in the global economy," USTR said.
Today's complaint also "indicates the resolve that the United States would bring to enforce the high standards won in the Trans-Pacific Partnership (TPP), ranging from market access for United States agriculture exports, labor and intellectual property rights, protection of the environment, and keeping the internet free and open," USTR said.
USTR also said the Obama administration has broken new ground on the enforcement of agricultural market access, including cases against India's non-science-based measures on poultry and other products allegedly to protect against avian influenza (U.S. prevailed in 2015), Indonesia's import licensing regime on beef, poultry, and horticultural products (case pending), and China's unfair taxes on U.S. broiler chicken products (U.S. prevailed in 2014; compliance challenge pending).
"Enforcement extends far beyond formal disputes," USTR said. "The Obama administration has opened markets for American workers, farmers, and businesses by taking tough stands to resolve unwarranted trade barriers with trading partners."
"For example, we have eliminated BSE-related restrictions in 16 countries since January 2015, gaining additional market access for U.S. beef in Brazil, Colombia, Costa Rica, Egypt, Guatemala, Iraq, Lebanon, Macau, New Zealand, Peru, Philippines, Saint Lucia, Singapore, South Africa, Ukraine, and Vietnam. As a result, U.S. beef exports have recovered to pre-2003 levels.
"We also successfully engaged with the Philippines — including through the Special 301 process — to enhance protection of intellectual property rights. These and similar actions have helped expand exports and level the playing field for American goods and services."
–The Hagstrom Report