US complaint over China farm price supports heads to WTO panel
WASHINGTON, Dec. 14, 2016 - The U.S. and China have failed
in bilateral consultations to resolve a U.S. complaint over Chinese domestic
price supports for farmers, setting up the next stage of the dispute with the
World Trade Organization (WTO) scheduled to begin the long settlement process.
On Sept. 9, the U.S. Trade Representative officially launched
a trade enforcement action against China over its artificially high prices for
wheat, corn and rice. Those supports, the U.S. charged, distort world markets
and cause billions of dollars in losses every year for U.S. farmers and
exporters.
Almost immediately the two countries entered into
consultations in a procedural attempt to settle the dispute. Those talks
failed, according to U.S. government sources, and the WTO has scheduled – at
the request of the U.S. – the first
meeting of a panel under its Dispute Settlement Body for Dec. 16.
The failure of the consultations came as little surprise, one
U.S. government officials said. According to sources, the U.S. had previously
confronted China many times over its crop price subsidies, but China never
admitted culpability.
“For us, domestic support in advanced developing countries
is the single largest trade irritant that U.S. wheat growers face,” said Dalton
Henry, vice president of policy for the U.S. Wheat Associates. “China is the
largest of those countries. It’s really hard to overstate the level of impact
that has. China is the world’s largest (wheat) producer and also the world’s
largest (wheat) consumer. So whatever policies they have are magnified because
of that status.”
An Iowa State University study
this year estimated that U.S. wheat exporters lost roughly $700 million in
revenue because of China’s domestic support programs that far exceed levels
allowed for in the WTO.
Most of that lost revenue, Henry said, is due to China’s
artificially high prices – up to $10 per bushel. Those prices are a massive
incentive for Chinese farmers to produce way more than they normally would
under market conditions that haven’t been altered by the government.
Right now, with China’s support prices in place, the country
is the 15th largest importer of wheat. If those supports were taken
down, China would become the second-largest world importer. And that’s a lot of
demand that U.S. producers would be happy to supply.
“I think most (U.S.) farmers support the lawsuit against
China on one big premise, and that’s the fact that farmers believe that they
can grow anything as long as it’s on a level playing field,” said Doug
Keesling, a farmer and former chairman of Kansas Wheat. “So if the playing
field is level between the U.S. and China … I have faith that our farmers will
be very competitive on the world market and grow their market share.”
When China joined the WTO in 2001 it agreed to maintain a
9.64-million-ton tariff
rate quota for foreign wheat imports. That level has never been reached.
U.S. Wheat Associates data show that China came close in 2004, importing about
80 percent of the TRQ, but that was an anomaly.
Henry said China has imported between 2 million tons and 3
three million tons over the past couple years.
“Can you imagine if we woke up tomorrow and China was
actually going to import up to the level of the TRQ they administer?” he said.
“We expect if they pulled back their domestic support, they would import at
least that much.”
If China bought an additional 6 million tons of wheat, that
would be enough to sharply boost prices here in the U.S., he said.
But if China loses the WTO case and eventually agrees to
take down its price supports, it will start burning through surpluses. In that
case, it’ll likely be a long time before U.S. farmers begin to see new demand,
Henry said.
Henry said he expects the WTO process to last between a year
and 18 months, and that’s if China doesn’t appeal a losing decision.
U.S. government officials say they are confident of a
victory, and Henry agreed.
“Certainly the evidence appears to be overwhelmingly in our
favor,” he said. “They administer these price supports. The levels that they
committed to (in joining the WTO) are being exceeded by leaps and bounds in all
three crops.”
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