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.
This panel report is a significant victory for U.S. agriculture that will help American farmers compete on a more level playing field, according to the U.S. Department of Agriculture (USDA).
“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,” U.S. Trade Representative Robert Lighthizer said. “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.”
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.
“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,” U.S. Secretary of Agriculture Sonny Perdue said.
Background provided by USDA:
In December 2016, USTR requested 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. 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.
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.