WASHINGTON, Dec. 15, 2016 - The U.S. is again challenging China in the World Trade Organization, and this time it’s over the country’s failure to import enough wheat, corn and rice to meet its tariff rate quotas.

When China joined the WTO in 2001 it agreed to import billions of dollars of agricultural commodities under a system of TRQs, but it never lived up to the agreement. U.S. government and industry officials say that’s a result of the artificially high price floors that the Chinese government sets for domestic producers.

The WTO challenge lodged today is tied to a complaint filed by the Office of the U.S. Trade Representative in September against China, the world’s largest wheat and rice importer. The USTR charged China with maintaining domestic price supports that are far above market rates. Those supports, the U.S. claimed, distort world markets and cause billions of dollars in losses every year for U.S. farmers and exporters.

“The facts in these two cases go hand in hand, demonstrating how Chinese government policies create an unfair advantage for domestic wheat production,” said Gordon Stoner, president of the National Association of Wheat Growers. “Both actions call attention to the fact that when all countries follow the rules, a pro-trade agenda and trade agreements work for U.S. wheat farmers and their customers.”

The USTR today also officially confirmed that it has requested that the WTO establish a dispute settlement panel on the September challenge against China’s price supports. The WTO has scheduled the panel’s first meeting for Friday.

China sets domestic wheat prices as high as $10 a bushel, said Dalton Henry, vice president of policy for the U.S. Wheat Associates. Those prices prod Chinese farmers to produce much more than they normally would under market conditions and effectively reduce the country’s need for imports.

“China’s TRQ policies breach their WTO commitments and limit opportunities for U.S. farmers to export competitively priced, high-quality grains to customers in China,” USTR Michael Froman said in a statement about the new complaint. “The United States will aggressively pursue this challenge on behalf of American rice, wheat, and corn farmers.”

China’s TRQs should have allowed for roughly $7 billion worth of imports of U.S. grain in 2015, according to USDA calculations, but less than half of that was actually purchased. If China TRQs had been effective, the country would have imported an additional $3.5 billion worth of the grain last year.

The U.S. does not export rice at all to China, even though the two countries have settled on protocols for trade after years of negotiations. One USTR official said today that the agency is still waiting for China to sign off on the agreement. When China joined the WTO it set two TRQs for rice imports from all foreign countries. The two TRQs – one for long grain rice and one for medium and short grain rice – are each set at 2.66 million metric tons.

Even though China isn’t yet making rice purchases from the U.S., American rice farmers are still losing out because of Chinese price supports, the USTR official said. Because China is under-filling its TRQs, it’s buying less foreign rice than it should and that grain is going to places and possibly displacing U.S. exports, the source said.

“Real access under tariff-rate quotas is vital to global trade and to providing our farmers and ranchers the opportunity to export high-quality, American-grown products to the world,” Agriculture Secretary Tom Vilsack said in the USTR announcement. “Although China has become a significant market for our grain exports, we could be doing much better than we are today.”


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