U.S. farmers lost as much as $3.5 billion in corn, wheat and rice sales to China last year because the world’s most populous nation used its tariff system to unfairly limit imports, the Obama administration said in a complaint to the World Trade Organization. Separately, the U.S. asked WTO to appoint a dispute panel to investigate its complaint of excessive Chinese subsidies of corn, wheat and rice.
In both cases, the U.S. says China failed to honor commitments to free trade that it made when it joined WTO. China is the largest customer for U.S. farm exports, estimated to account for $21.8 billion, or one-sixth, of sales this year.
U.S. grain groups have complained that developing countries, such as China, Brazil and India, are distorting world trade and violating WTO rules even as they press for subsidy cuts by industrialized nations. China has huge stockpiles of corn, wheat, rice and cotton.
The new case, challenging China’s use of tariff-rate quotas (TRQs) for imported grain, is the 15th complaint against China at WTO by the Obama administration. TRQs allow a specified amount of merchandise to enter a country during a period of time at reduced tariff rates.
“China’s TRQ policies breach their WTO commitments and limit opportunities for U.S. farmers to export competitively priced, high-quality grains to China,” said U.S. trade representative Michael Froman. In a statement, the U.S. trade representative’s office (USTR) said China’s “opaque and unpredictable management of TRQs” for corn, wheat and rice repeatedly held imports below the 7.2 million tonnes of corn, 9.6 million tonnes of wheat and 5.3 million tonnes of rice that it agreed to admit annually at lower tariff rates.
The TRQs were worth $7 billion in imports in 2015, based on Chinese import prices, said USTR, and the U.S. share would have been $3.5 billion.
USA Rice, an umbrella organization for the rice industry, said the WTO complaint “will be precedent-setting,” and urged the administration to also move against domestic supports provided by India and Thailand.
In September, the United States accused China of exceeding WTO limits on farm subsidies, estimating China provided nearly $100 billion in excess supports for corn, wheat and rice in 2015 by setting domestic prices for the grains above world market levels. Agriculture Secretary Tom Vilsack said the high support prices encouraged Chinese production and displaced imports. “This has resulted in significant losses to American producers.”
The first step in the WTO dispute process is a 60-day period for consultations by the countries involved in trade complaint. With that period expired, the United States asked for appointment of a dispute panel. The WTO was to consider the request at a meeting today. It could take a couple of months to appoint a panel and an additional 10 months for a decision.
“The facts in these two cases go hand-in-hand, demonstrating how Chinese government policies created an unfair advantage for domestic wheat production,” said wheat farmer Gordon Stoner, president of the National Association of Wheat Growers.