WTO Sides with the U.S. on Chinese Agriculture Subsidies

Brian German Agri-Business

The World Trade Organization (WTO) will be announcing its decision regarding Chinese agriculture subsidies in the coming weeks and is expected to rule in favor of U.S.  For many years the Chinese government purchased domestic corn, cotton, and soybeans at levels that exceeded those permitted under WTO rules.  According to Politico, the confidential ruling was already shown to the interested parties last month and a general public announcement is expected by March.

Chinese agriculture subsidiesDomestic agricultural support in China is primarily provided by price support and government procurement.  The Chinese government buys crops when prices fall to a government-announced minimum, inflating the price of certain Chinese commodities and distorting market conditions to appear as though Chinese farmers should increase production.  In an article that was recently published in the Review of International Political Economy, the claim was made that “China has emerged as the world’s largest subsidizer, profoundly transforming the global politics of agricultural subsidies.” 

A case was brought to the WTO in 2016 when the U.S. made the claim that China exceeded the permissible international limits for domestic support.  U.S. Trade Representative at the time, Michael Froman alleged that China surpassed the permitted amount for ag subsidies by more than $100 billion in 2015.  In the last few years, China has been working to adjust its subsidy programs.  Minimum prices for rice were reduced for the first time in 2017, followed by further cuts in rice and wheat prices last year.

The issue of Chinese agriculture subsidies was also addressed in the Priority Recommendations for U.S.-China Trade Negotiations from the U.S. Chamber of Commerce and American Chamber of Commerce in China.  The report states that “China provides massive subsidies…that distort domestic and global competition in favor of Chinese national/global champions.”  The report suggests that China resolve the issue by removing “subsidies and market distortions through a State Council/Party proclamation and under strict timelines.”

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Brian German

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Ag News Director, AgNet West