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Case Against Chinese Agriculture Subsidies Filed at WTO by the U.S.


09/14/2016


Case Against Chinese Agriculture Subsidies Filed at WTO by the U.S.
Alleging that American farmers are being denied the ability to compete fairly for exports to China due to the offering excessive support for the production of corn, rice and wheat by the government there, the U.S. has brought a trade complaint to the World Trade Organization against China.
 
The U.S. Trade Representative which launched the action, said in a statement that an estimated $100 billion more than what it had committed to when the nation joined the WTO was the value of China’s price support for the commodities last year.
 
Saying on its website that it complied with WTO rules and would handle the complaint in accordance with established procedures, China’s Ministry of Commerce responded by also expressing regret at the U.S. action.
 
The complaint comes as free-trade policy as well as U.S. trade with the Asian country becomes hot topics in this year’s U.S. presidential election campaign and is the 14th brought by the USTR against China at the WTO since 2009. While the U.S. is the world’s biggest agricultural exporter, China is an increasingly large importer of all kinds of foods.
 
"Through tariff cuts and the removal of other trade barriers, China has gone from a $2-billion-a-year market for U.S. agricultural products to a $20-billion-plus market. But we could be doing much better, particularly if our grain exports could compete in China on a level playing field," Agriculture Secretary Tom Vilsack said in the statement.
 
Amid booming global supplies and lower commodity prices, American farmers have seen their incomes slide. Some in the industry cautioned that there may be a backlash, others welcomed Tuesday’s action.
 
“The most likely impact in the next six months might be to motivate China to impose anti-dumping tariffs on U.S. products, including agricultural products. It will have little or no impact on Chinese ag policies,” William Tierney, chief economist for Chicago-based research and analysis firm AgResource Co., said.
 
Decisions related to potential tariffs on imports of U.S. dried distillers grains, or DDGS, an animal-feed byproduct from ethanol production is expected to be announced this month by the Chinese Ministry of Commerce, Platts reported in August. Arguing that U.S. producers were selling DDGS at artificially low prices, Chinese ethanol producers called for the investigation in January.
 
In order to reduce stockpiles, in the last two months, corn and other commodities from government-owned reserves are being sold by China. Chinese corn inventories reached a 16-year high in 2016, say the U.S. Department of Agriculture. The Chinese Ministry of Finance said last month that a 13 percent value-added tax rebate on exports of corn products, including corn starch and ethanol was resumed by China effective Sept. 1.
 
U.S. corn prices dropped near a nine-year low as favorable weather boosted yields to a record this year, wheat prices fell to 10-year low last month. According to USDA data, after Canada, China was the biggest buyer for U.S. agricultural products in 2015.
 
“The timing of the WTO is perilous, with most corn and wheat farmers trying to make ends meet. Rather than talk and negotiate, the U.S. has gone out and irritated one of its best customers. Subsidizing your own farmers for food security is not trade distorting,” said Peter Meyer, senior director of agricultural commodities at Pira Energy Group in New York.
 
(Source:www.bloomberg.com) 
 


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