The Obama Administration has launched a new trade enforcement action against the People’s Republic of China at the World Trade Organization concerning excessive government support provided for China's production of rice, wheat and corn through its use of “market price support” in excess of China’s commitments under WTO rules.
In 2015, China’s market price support for these products was estimated to be nearly $100 billion in excess of the levels China committed to during its accession to WTO. 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 U.S. is challenging China’s government support on behalf of American rice, wheat and corn farmers to help reduce distortions for rice, wheat and corn prices and help American farmers compete on a more level playing field.
Pursuant to the market price support programs, China annually announces the minimum prices at which the government will purchase Indica rice, Japonica rice, wheat and corn in major producing provinces during the harvest season. Through this program, China has maintained domestic prices at levels above world market levels since 2012, influencing domestic production decisions and distorting the Chinese market.
China committed, through its WTO schedule, not to provide trade-distorting domestic support, except for domestic support at or below a de minimis level of 8.5% for each agricultural product. China, however, has provided domestic support for each product – Indica (long-grain) rice, Japonica (short- and medium-grain) rice, wheat and corn – substantially above the 8.5% de minimis level.
U.S. Trade Representative Michael Froman said, “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. We will aggressively pursue this challenge on behalf of American farmers and hold the Chinese government accountable to the standards of fair global trade.”
Agriculture Secretary Tom Vilsack explained that China, through tariff cuts and the removal of other trade barriers, has gone from a $2 billion-per-year market for U.S. agricultural products to a $20 billion-plus market. However, he said the U.S. could be doing much better, particularly if U.S. 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,” Vilsack said. “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.”
“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,” Sen. Pat Roberts, chairman of the Senate Agriculture, Nutrition & Forestry Committee, said. “U.S. producers know the importance of sticking to their commitments, and they have experienced firsthand the harm caused to the agriculture industry by countries that don’t follow the rules.”
America’s rice, wheat and corn industries are vitally important to the U.S. economy, according to the U.S. Department of Agriculture. Together, exports from these industries average $20 billion per year and contribute an additional estimated $70 billion to the U.S. economy every year while supporting 200,000 American jobs.