U.S. Trade Representative Michael Froman informed China today that the U.S. has launched a formal complaint at the World Trade Organization over China’s price supports for corn, wheat and rice, saying they distort world markets and are costing U.S. farmers hundreds of millions of dollars.
At a press conference in Washington, Froman said China’s breaches of WTO rules are massive. With Agriculture Secretary Tom Vilsack at his side, Froman said that China exceeded the WTO maximum for domestic price supports for the three commodities by $100 billion in 2015.
In a statement, President Barack Obama endorsed the USTR action. “China’s government has set prices for wheat, corn, and rice well above market levels, which has led to unfair government subsidies that are in violation of WTO rules,” Obama said. “These unfairly distorted prices on important crops lead to overproduction in China and disadvantage American farmers who export these same crops around the world.”
Alan Tracy, president of the U.S. Wheat Associates, said China routinely guarantees its farmers more than $10 per bushel for their wheat and that artificially pushes up production, distorting the international market and robbing U.S. exporters of sales. U.S. farmers received less than half of that for their wheat last year. Iowa state researchers have estimated U.S. wheat exporters lost roughly $700 million in 2015 because of China’s domestic support programs that far exceed levels allowed for in the WTO.
“Wheat production subsidies in China and other advanced developing countries are the single biggest policy issue affecting our farm gate prices and global trade flows,” said Tracy. “In taking this step, USTR and USDA are demonstrating that trade enforcement can ensure that our many trade agreements and a pro-trade agenda really work for American farmers.” Sen. Heidi Heitkamp, D-N.D., was one of a half-dozen lawmakers at the USTR announcement today and she applauded the complaint.
“On top of challenging commodity prices, North Dakota farmers shouldn’t have to deal with China breaching trade commitments and making it tougher for us to get market value for our crops,” she said. “When countries cheat on trade agreements and distort global markets, we need to hold them accountable, and that’s what the U.S. Trade Representative and the Secretary of Agriculture are doing today. Addressing Chinese over-subsidization can help support the price of U.S. wheat and corn, and that’s good news for North Dakota farmers.”
All WTO members are required to submit totals for domestic crop support yearly to the WTO, Froman said, but China has not done that in six years.
The U.S. has confronted China multiple times over the crop price subsidies, U.S. trade officials said today, but the country was “unresponsive.”
U.S. officials say they will do their best to resolve the complaint with China through the WTO consultation process over the coming months, but they stressed the government is prepared to litigate. China is required to sit down with the U.S. within 60 days to address the complaint, but the officials said they hope to start next month when representatives of both countries are expected to meet in Geneva.
The complaints against China are numerous – beyond the price supports, China is believed to be subsidizing everything from the costs of seeds to fertilizer for its farmers – but the country is still the largest customer for U.S. farm commodities.
“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,” Vilsack said today. “But we could be doing much better, particularly if our grain exports could compete in China on a level playing field.”
House Agriculture Committee Chairman Michael Conaway said today he appreciated the USTR complaint against China, but also stressed he’d like to see further action, specifically on cotton.
“I am very hopeful that beyond the challenges announced today, that the U.S. government will also vigorously pursue a case against China concerning its cotton policy which has wreaked havoc on our domestic producers,” said Conaway, who hails from Texas, the biggest U.S. cotton-producing state. “Absent this, I fear that our domestic cotton production and all that it means to our nation’s economy will be lost in much the same way we forfeited our textile industry, once the largest manufacturing sector of our economy.”
China kept domestic prices for cotton artificially inflated for years, a policy that attracted imports and helped create massive stockpiles in the country. Now China is trying to offload those stockpiles on the global market and that’s pushing down international prices.
Today’s press conference, which was held at USDA headquarters, was primarily about the trade complaint, but Froman and others used the platform to call for Congress to ratify the Trans-Pacific Partnership, a massive trade deal involving the U.S., Japan, and 10 other Pacific Rim countries.
China, which is not included in the TPP, isn’t just breaking WTO commitments, Obama said. The country is also working to forge its own multilateral trade agreement and take the lead in the region.
“It’s all the more important that we finalize TPP soon because as we speak, China is negotiating a trade deal of its own – one that would carve up the growing Asia-Pacific markets at our expense, risking American jobs, businesses, and goods,” Obama said. “Unless we act now to set our own high standards, the fast-growing Asia-Pacific (region) will be forced to play by lower-standard rules that we didn’t set. We can’t let that happen.”