WASHINGTON, D.C., U.S. — The World Trade Organization (WTO) dispute settlement panel ruled China has administered its tariff-rate quotas (TRQs) for wheat, corn, and rice inconsistently with its WTO commitments.  Contrary to those commitments, China’s TRQ administration is not transparent, predictable, or fair, and it ultimately inhibits TRQs from filling, denying U.S. farmers access to China’s market for grain.

In August 2017, the United States requested that the WTO establish a dispute settlement panel to consider whether China administers its TRQs for long-grain rice, short- and medium-grain rice, wheat, and corn in a manner inconsistent with its WTO commitments.

The panel report agreed with the United States that China administers its TRQs in a manner inconsistent with its Accession Protocol obligations, through its eligibility criteria, allocation and reallocation procedures, public comment process, and processing restrictions. In addition, China allocates a significant portion of each TRQ to a designated state-trading enterprise (STE) and does not subject the STE to the same rules applied to non-state trading enterprises applying for and importing grains under the TRQs, the panel said. Each finding individually established that China’s TRQ measures are inconsistent with its obligations.

This decision follows a separate ruling in late February that determined China provides excessive domestic price supports in excess of its WTO commitments. The U.S. Trade Representative (USTR) brought these disputes to the WTO in 2016, armed with clear evidence that China’s policies distort world trade of those commodities and create an unfair advantage for domestic production. 

“This second important victory for the United States further demonstrates that President Trump will take all steps necessary to enforce trade rules and to ensure free and fair trade for U.S. farmers,” said Robert Lighthizer, USTR. “The administration will continue to press China to promptly come into compliance with its WTO obligations.”

According to the U.S. Department of Agriculture (USDA), China’s grain TRQs have annually underfilled. The USDA estimates that if China’s TRQs had been fully used, it would have imported as much as $3.5 billion worth of corn, wheat and rice in 2015 alone.

“Making sure our trading partners play by the rules is vital to providing our farmers the opportunity to export high-quality, American-grown products to the world,” said U.S. Agriculture Secretary Sonny Perdue. “Today’s announcement is another victory for American farmers and fairness in the global trade system. We will use every tool available to gain meaningful market access opportunities for U.S. grains and other agricultural products.”

The U.S. Wheat Association (USW) urged China to comply with WTO agreements.

“With these decisions, we call on the Chinese government to come into compliance with the rules it accepted when it joined the WTO,” said Vince Peterson, president of USW. “The world now sees that their policies stifle market-driven wheat trade, block export opportunities and force private sector buyers and consumers to pay more than they should for milling wheat and wheat-based foods. We appreciate that the Trump administration continues to shine a light on these distorting policies by supporting the WTO dispute cases.”

The U.S. Grains Council supported the WTO’s decision to move toward a “fair market.”

“The report is an important acknowledgement China has not fulfilled its obligations to allow for tariff-rate quotas for corn to be filled while maintaining high domestic corn prices consistently above international prices,” said Tom Sleight, president and chief executive officer of the USGC. “We believe this is an example of the WTO working to help move us all toward a more open and fair market for grains.

“The council believes a stable market in which prices are determined by supply and demand as part of global dynamics will benefit the long-term development of China’s feed, livestock and corn-processing industries, as well as its consumers of animal and processed corn products. A more open market is in both China’s best interest and that of our members, farmers and exporters.

The National Association of Wheat Grower (NAWG) supported the United States in requesting the dispute panel and its decision.

“NAWG applauds the administration for pressing the WTO to enforce trade rules that ensure fair trade for U.S. wheat growers,” said Chandler Goule, CEO of the NAWG. “Further, we appreciate the work done by those members of Congress who continued to press on this issue ad move the process forward.”