WTO rules in favor of U.S. on Chinese grains dispute

March 1, 2019

U.S. Trade Representative (USTR) Robert Lighthizer and Secretary of Agriculture Sonny Perdue have announced that a World Trade Organization (WTO) dispute settlement panel found that 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.

In December 2016, the U.S. trade representative’s office requested that the 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. China’s WTO membership agreement permits trade-distorting subsidies of up to 8.5% of the total value of production.

According to Reuters, China argued that it was not breaching that limit because only the grains obtained by government should be counted as subsidized. The United States successfully argued that state buying at a guaranteed price raised the whole market.

The panel report agreed with the United States that China provided domestic support to its agricultural producers during 2012–2015, 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.

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.

In response to the ruling, the U.S. Wheat Associates (USW), the export market development organization for the U.S. wheat industry, released the following statement: “We are very pleased that the Trump Administration has continued to support this dispute and a second case that challenges China’s administration of the 9.6 million metric ton tariff rate quota on imported wheat that its government agreed to when it joined the WTO. 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, USW president.

Press release

Reuters article

USW statement