WTO Officially Acknowledges Chinese Subsidies Violate Rules

Brian GermanAgri-Business, Trade

The World Trade Organization (WTO) has now officially ruled in favor of the U.S. in a complaint related to Chinese subsidies for agricultural products.  The WTO dispute settlement panel found that China exceeded international standards for farming support, causing trade distortion and creating artificial pricing for wheat and rice.  The ruling was expected to go in favor of the U.S. after information was provided to officials from both countries prior to the public announcement.

Chinese subsidies“The United States proved that China for years provided government support for its grain producers far in excess of the levels China agreed to when it joined the WTO.  China’s excessive support limits opportunities for U.S. farmers to export their world-class products to China.  We expect China to quickly come into compliance with its WTO obligations,” U.S. Trade Representative Robert Lighthizer said in a press release.

Price support programs can have a significant global impact, which is why there are established rules that are committed to by WTO members, through the WTO Agreement on Agriculture.  The agreed-upon rules within the WTO guidelines allow China to provide non-exempt support up to 8.5 percent of the total value of production for a specific product.  The panel ruled that Chinese subsidies for producers from 2012 to 2015 were well in excess of allowances for two different types of rice, as well as wheat.

“We know that America’s farmers and ranchers thrive in a market-oriented, rules-based global economy.  That means all countries must play by the rules, which is why this finding is so important to U.S. agriculture,” said Secretary of Agriculture Sonny Perdue. 

Information from USDA indicates that China will have an inventory of 140 million metric tons of wheat by June 2019, which equates to approximately half of the global supply.  China typically only consumes roughly 16 percent of the world’s wheat.  There is optimism that the WTO ruling will encourage China to comply with established limits and return global grain prices back to natural market levels.

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Brian German

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Ag News Director, AgNet West