WTO ruling backs US agricultural support claims against China

WTO dispute panel found China provides excessive government support to its grain producers

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Port of Baltimore
The Port of Baltimore is one of many ports in the U.S. involved in agricultural trade. (USDA photo by Bob Nichols.)

WASHINGTON —A World Trade Organization (WTO) dispute settlement panel has found that China has provided trade distorting domestic support to its wheat and rice producers well in excess of its commitments under WTO rules.

China’s market price support policy artificially raised Chinese prices for grains above market levels, creating incentives for increased Chinese production of agricultural products and reduced imports.

U.S. officials say the WTO panel report, released Feb. 28, is a “significant victory” for U.S. agriculture that will help American farmers compete on a more level playing field.

It is the first dispute to successfully challenge China’s agricultural policies that disregard WTO rules.

“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,” said U.S. Trade Representative Robert Lighthizer. “We expect China to quickly come into compliance with its WTO obligations.”

U.S. Secretary of Agriculture Sonny Perdue said the dispute 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 workers and businesses.

“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,” said Perdue.

Background

In December 2016, the U.S. Trade Representative requested that the WTO establish a dispute settlement panel to consider whether China provided 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 in 2012, 2013, 2014, and 2015.

The panel found the market price support for corn had expired prior to the US initiation of the dispute, and declined to rule on the corn measure.

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, 2015, well in excess of its WTO commitments.

Each finding individually established that China broke its overall agricultural domestic support commitment for agricultural producers.

Compliance with WTO rules will lead to a reduction in the excessive support provided to China’s grains producers.

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