8 April 2016
U.S. Wheat Growers Claim Mainland Chinese Subsidies Violate WTO Rules
An association representing U.S. wheat growers is currently working with the Office of the U.S. Trade Representative and the U.S. Department of Agriculture to develop a possible WTO case against mainland China’s excessive wheat subsidies and other policies that allegedly harm U.S. farmers. U.S. Wheat Associates contends that a 2014 study shows that mainland China effectively pays its farmers a minimum procurement price of more than US$10 per bushel for wheat and subsidises input costs. According to the study, mainland Chinese authorities provide an aggregate measure of support of at least US$15.4 billion or 36 percent of the value of domestic wheat production, which ostensibly far exceeds the 8.5 percent de minimis limit under WTO requirements.
The association adds that mainland China also agreed to allow wheat imports at a one percent tariff rate subject to a 9.64 million metric tonne limit, with out-of-quota imports subject to a 65 percent duty. However, mainland China has allegedly failed to administer this tariff-rate quota as agreed and imports invariably fall far below the quota even when domestic prices are far above world prices.
The association concludes that in light of this evidence mainland China’s “noncompliant domestic subsidies and TRQ administration create artificial incentives for its farmers to grow even more wheat at a time when China already controls almost 40 percent of world wheat stocks.” Further, these policies are believed to “suppress wheat import demand in China and put additional downward pressure on world wheat prices.” The association believes that removing mainland China’s domestic wheat support would have significant benefits for farmers in wheat exporting countries, including the United States, by leading to lower wheat production and domestic prices in the mainland together with an increase in wheat imports.