China is the largest buyer of U.S. farm exports and also the target of 14 of 23 world trade complaints filed by the Obama administration. In a new case, the United States accuses China of paying unfairly large subsides to corn, wheat and rice growers, distorting the world market and hurting U.S. farmers.
“We’ve won every (WTO) case that’s been decided,” said President Obama. “We’re confident the case we’re bringing today will be no different: It should bring an end to China’s illegal subsidies, remove significant barriers on American exports, and level the playing field for American farmers and their families who rely on the rice, wheat, and corn industries and the hundreds of thousands of jobs they help support.”
U.S. Trade Representative Michael Froman said Chinese subsidies for wheat, corn and rice in 2015 were $100 billion larger than the limits China accepted when joining the WTO. “We will aggressively pursue this challenge on behalf of American farmers and hold the Chinese government accountable to the standards of fair global trade,” Froman said during a news conference at USDA headquarters.
The U.S. complaint follows months of agitation by farm groups, who commissioned studies to show the damage to U.S. grain exports. Other developing nations, such as Brazil and India, also were accused of violating WTO rules at the same time they press for subsidy cuts in industrialized nations. China’s price support programs cost U.S. wheat growers as much as $700 million a year in lost sales, said the National Association of Wheat Growers and U.S. Wheat Associates. The wheat groups said China offered farmers $10 a bushel for wheat, far above the world price.
“This is just the tip of the ice berg,” said House Agriculture chairman Michael Conaway, who called for a U.S. complaint against China’s cotton program. Conaway is from Texas, the top cotton-growing state.
One of the agricultural powers of the world, China holds roughly half of the world stockpiles of cotton, corn, wheat and rice. It is constraining cotton production while trying to liquidate a vast government-owned surplus. USDA estimates China will buy $21.5 billion of U.S. farm exports in the fiscal year that opens on Oct. 1, or 16 percent of total farm exports. Some 20 cents of every $1 in receipts by farmers come from exports.
“Make no mistake, this case sends an important message to all WTO members,” said Agriculture Secretary Tom Vilsack, about the importance of heeding world trade rules.
During the news conference, Froman, Vilsack and several senators and representatives said enforcement was vital to assure trade rules are respected and to bolster public support for trade agreements, such as the 12-nation Trans-Pacific Partnership pact awaiting a vote in Congress. The unpopular pact is opposed by both presidential candidates.
The WTO dispute settlement process calls for 60 days of consultation once a challenge is filed. If the consultations do not produce a result, the WTO appoints a panel to examine the case and to propose steps to resolve the matter. Countries are given “a reasonable period of time” to comply. If they do not, the prevailing nation can apply retaliatory tariffs on products from the offending nation.