Chinese trade practices

WTO Officially Acknowledges Chinese Subsidies Violate Rules

Dan Economy, Trade

Chinese subsidies

The World Trade Organization (WTO) has now officially ruled in favor of the U.S. in a complaint related to Chinese subsidies for agricultural products.  The WTO dispute settlement panel found that China exceeded international standards for farming support, causing trade distortion and creating artificial pricing for wheat and rice.  The ruling was expected to go in favor of the U.S. after information was provided to officials from both countries prior to the public announcement.

Chinese subsidiesPrice support programs can have a significant global impact, which is why there are established rules that are committed to by WTO members, through the WTO Agreement on Agriculture.  The agreed-upon rules within the WTO guidelines allow China to provide non-exempt support up to 8.5 percent of the total value of production for a specific product.  The panel ruled that Chinese subsidies for producers from 2012 to 2015 were well in excess of allowances for two different types of rice, as well as wheat.

“We know that America’s farmers and ranchers thrive in a market-oriented, rules-based global economy.  That means all countries must play by the rules, which is why this finding is so important to U.S. agriculture,” said Secretary of Agriculture Sonny Perdue. 

Information from USDA indicates that China will have an inventory of 140 million metric tons of wheat by June 2019, which equates to approximately half of the global supply.  China typically only consumes roughly 16 percent of the world’s wheat.  There is optimism that the WTO ruling will encourage China to comply with established limits and return global grain prices back to natural market levels.