WASHINGTON, D.C., U.S. — A World Trade Organization (WTO) dispute settlement panel found China has provided trade distorting domestic support to its grain producers well in excess of its commitments under WTO rules.
According to the WTO’s findings, 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.
On Sept. 13, 2016, the United States requested consultations with China regarding certain measures through which China appeared to provide domestic support in favor of agricultural producers, in particular, to those producing wheat, Indica rice, Japonica rice and corn.
“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 Robert Lighthizer, U.S. trade representative (USTR). “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.”
In December 2016, the USTR 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. 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% 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. Specifically, the panel found China had provided support in excess of permitted levels for Indica rice, Japonica 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 2012-15 given that China had apparently changed its program in 2016, just prior to the WTO’s establishment of the panel.
“We know that America’s farmers and ranchers thrive in a market-oriented, rules-based global economy,” said U.S. Secretary of Agriculture Sonny Perdue. “That means all countries must play by the rules, which is why this finding is so important to U.S. agriculture.”
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.