The Obama Administration has launched a trade enforcement action against the People’s Republic of China at the World Trade Organization (WTO) concerning government support provided for Chinese production of rice, wheat, and corn. The complaint challenges China’s use of “market price support” for three key crops (rice, wheat, and corn) in excess of China’s commitments under WTO rules.
In 2015, China’s “market price support” for rice, wheat and corn is estimated to be nearly $100 billion in excess of the levels China committed to during its accession. 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. The United States is challenging China’s government support on behalf of American rice, wheat, and corn farmers to help reduce distortions for rice, wheat, and corn, and help American farmers to compete on a more level playing field.
“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,” said United States Trade Representative Michael Froman “We will aggressively pursue this challenge on behalf of American farmers and hold the Chinese government accountable to the standards of fair global trade.”
“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,” said Agriculture Secretary Tom Vilsack. “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. 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.”
This trade enforcement action marks the 14th complaint brought by the Office of the United States Trade Representative (USTR) against China at the WTO since 2009.
Lawmakers weigh in
“Eliminating barriers to trade, and gaining access to new markets is critical for our producers. But, those efforts will go without reward if the existing trade rules are not enforced,” said Senator Pat Roberts, Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry. “U.S. producers know the importance of sticking to their commitments, and they have experienced first-hand the harm caused to the agriculture industry by countries that don’t follow the rules.”
“In today’s global economy, we need to hold countries like China accountable for anti-competitive trade practices that hurt American farmers and businesses,” said Senator Debbie Stabenow, Raking Member of the Senate Committee on Agriculture, Nutrition, and Forestry. “I applaud U.S. Trade Representative Michael Froman and Secretary of Agriculture Tom Vilsack for working with the World Trade Organization to bring this case forward. We need to make sure that American farmers can compete on a level playing field and I will follow this case closely as we move forward.”
"Today’s enforcement actions highlight how we can use trade rules to America’s advantage. Robust enforcement of our trade agreements, including WTO rules, ensures that our farmers, businesses, and workers are treated fairly,” said House Ways and Means Chairman Kevin Brady.
"Not only does China refuse to abide by the commitments it made in joining the WTO, it attempts to obscure its illegal actions by consistently failing to even report on the support it is providing to its farmers,” said House Agriculture Committee Chairman K. Michael Conaway. “The actions of the Chinese government-and increasingly those of other advanced developing countries-are having a detrimental impact on America's farmers and ranchers. While enforcement action is long past due, I applaud the administration for taking action on behalf of our nation's corn, rice, and wheat producers."
“America’s farmers are ready and able to compete in a global marketplace but can’t do so without a level playing field,” said House Agriculture Committee Ranking Member Collin Peterson. “The United States has a responsibility to hold other countries accountable when they fail to honor their WTO commitments, resulting in lost opportunities for American farmers.”
"On top of challenging commodity prices, North Dakota farmers shouldn't have to deal with China breaching trade commitments and making it tougher for us to get market value for our crops," said Senator Heidi Heitkamp, member of the Senate Committee on Agriculture, Nutrition, and Forestry. "When countries cheat on trade agreements and distort global markets, we need to hold them accountable, and that's what the U.S. Trade Representative and the Secretary of Agriculture are doing today. Addressing Chinese over-subsidization can help support the price of U.S. wheat and corn, and that's good news for North Dakota farmers."
"Today's announcement is welcome news to the producers of the Third District of Nebraska who are willing and very able to compete internationally so long as the playing field is level," said Representative Adrian Smith, member of the House Ways and Means Committee and Chair of the Modern Agriculture Caucus. "America's engagement and leadership in the WTO and trade agreements ensures we can hold our trading partners to the highest standards."
Ag leaders comment
"The U.S. Grains Council believes in free and open trade and the importance of both strong trade policy and market development,” said U.S. Grains Council president and CEO Tom Sleight. "We also believe the WTO provides structure and accountability for global trade. Consultations and negotiations are integral parts of the WTO process, and we welcome USTR's and USDA's move on this critical issue.”
“The American Farm Bureau Federation supports the action taken by the Office of the U.S. Trade Representative to begin dispute settlement proceedings against China over their agricultural subsidy levels,” said AFBF president Zippy Duvall. “We, like the USTR, are concerned that China exceeded its domestic support limits for corn, wheat and rice from 2012 to 2015.”
Since 2009, USTR has brought 23 enforcement actions (including this one) at the WTO. The United States has won every one of these disputes decided thus far.
Source: U.S. Trade Representative, U.S. Grains Council