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U.S. Claims WTO Win on Mainland China Grain Subsidies

A WTO dispute settlement panel has sided with the United States in the first WTO case pursued by that country against mainland China’s agricultural support policy. A Bloomberg article notes that if mainland China complies with this “landmark ruling” it could “help make America’s farmers more competitive as they struggle with the fallout of Trump’s trade war with China.” On the other hand, the article notes, mainland China could appeal the decision, which would likely leave the issue in limbo for the foreseeable future because the WTO Appellate Body will be unable to hear and decide cases if the number of active judges drops below three later this year.

The United States had argued in December 2016 that mainland China’s market price support for two kinds of rice (Indica long-grain and Japonica short- and medium-grain), as well as wheat and corn, were in excess of mainland China’s WTO accession commitments. Mainland China is allowed to provide support of 8.5 percent of the value of a commodity’s total production but the panel found that agricultural support for wheat and the two types of rice were at levels ranging from 12 percent to 32 percent. The panel declined to rule on mainland China’s corn support programme because that programme was modified in 2016.

U.S. Trade Representative Robert Lighthizer commented in response to the ruling that “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.” Lighthizer had testified to the House Ways and Means Committee on 27 February that the current U.S. negotiations with mainland China could help resolve some of the bi-lateral agricultural trade policy problems. U.S. Agriculture Secretary Sonny Perdue also hailed the WTO decision, noting that “all countries must play by the rules, which is why this finding is so important to U.S. agriculture.”

U.S. Wheat Associates President Vince Peterson also applauded the WTO ruling while USA Rice highlighted in a statement the “enormous” economic impact of mainland China’s economic practices, stating that “in 2015, the year before the WTO case was filed, China's ‘market price support’ for rice, corn, and wheat was estimated to be nearly $100 billion in excess of the levels China committed to when it joined the WTO.”

While WTO members can appeal a dispute settlement panel decision to the Appellate Body, that entity currently has a case backlog amidst a shortage of judges (in part due to a decision by the United States to block the appointment of new judges). The United States could seek authority to institute retaliatory measures against mainland China for the amount affected by subsidies. Multi-lateral negotiations have been deadlocked for years over differences on many issues, but one long-standing issue has been the U.S. insistence that agricultural subsidies be reduced.

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