WASHINGTON, June 3, 2015 – China, Brazil and India have dramatically increased their spending on farmers, and some lawmakers say it’s time for the United States to consider bringing cases against them at the World Trade Organization.
“We need to across the board be holding our trading partners to their commitments,” House Agriculture Chairman Mike Conaway, R-Texas, said at a hearing Wednesday.
The committee’s ranking Democrat, Collin Peterson of Minnesota, said it’s time “to start challenging Brazil, China, India and others when they fail to meet their WTO commitments.”
The biggest concern is China, which accounted for 34 percent of the $492 billion in global agricultural subsidies in 2012, according to the Organization for Economic Cooperation and Development, compared to 7 percent for the United States. Farm spending by China and Brazil, which amounted to less than half of U.S. agricultural support in 2001, now exceeds American spending by several fold, according to Texas Tech University economist Darren Hudson.
“Developing country support is growing exponentially,” Hudson told the panel.
China is providing as much as $109 billion a year in support for corn, wheat and rice alone though price supports and other programs, while India provides as much as $48 billion for those commodities, according to a study by DTB Associates, a Washington consulting firm.
China’s total amount of market-distorting farm support amounts to at least twice as much as the $19.1 billion that the United States is limited to spending under WTO rules, and China could be spending as much as five times that much, said Craig Thorn, a DTB partner who represented the U.S. Trade Representative on agriculture issues at the WTO in the 1990s.
USTR has been raising concerns directly with China, Thorn told Rep. Ann Kirkpatrick, D-Ariz. “This issue is getting a lot of attention at USTR,” he said. He said he didn’t know when USTR would decide to bring a case against China.
Asked Wednesday about the China issue, USTR said in a statement that it would take the “steps we believe are necessary for each issue at the appropriate time. Our preference, whenever possible, is to resolve concerns with China without resorting to dispute settlement and in a timely and effective manner that benefits U.S. producers, farmers, and workers.”
Hudson told the committee that China and other countries have also been slow to disclose to the WTO how much they are spending on farmers. China only recently reported its 2010 spending.
China’s cotton policies also have been posing a major challenge for U.S. growers. China stockpiled cotton temporarily from 2011 to 2013 to prop up prices and has since switched to direct subsidies for growers. The Chinese farmers’ support price of $1.60 a pound is twice the world price and three times the U.S. loan rate, the price floor for U.S. farmers, said Hudson.
China as well as India and Mexico also have higher price guarantees for corn, according to Hudson. China’s is $10.11 a bushel, compared to the $3.70 U.S. reference price under the new Price Loss Program. India’s price guarantee is $5.70 a bushel; Mexico’s is $7.20.
Wednesday’s hearing came as the Republican leadership and President Obama are working to build support in the House for a fast-track trade bill to set up the congressional process for approving new agreements with the Pacific Rim and the European Union.
There also are reports that Brazil is considering a challenge to the new commodity programs created by the 2014 farm bill. The foreign subsidy spending also could give committee members some ammunition if colleagues try to chip away at farm bill programs through the appropriations process.
Hudson and Thorn said they didn’t think Brazil had legal grounds to win a WTO case against U.S. corn and soybean subsidies, which are structured significantly different than the cotton programs that Brazil successfully challenged earlier. USDA economists made the same point in an interview last month with Agri-Pulse. As of Wednesday, Brazil hadn't notified the United States that it will formally raise concerns at the WTO about the subsidies.
Conaway called on the WTO to be “vigilant and wary in regard to Brazil’s latest saber rattling.”