US files trade case against China over grain quotas

US files trade case against China over grain quotas
© Getty Images

U.S. trade officials on Thursday launched a challenge to China’s tariff quota treatment for rice, wheat and corn that they say undermines American farmers. 

The Obama administration’s complaint argues that China’s lack of transparency and unpredictable management of tariff-rate quotas (TRQs) hurts U.S. agriculture by failing to meet World Trade Organization (WTO) market access commitments.

“Today’s new challenge, as well as the steps we are taking to advance our case against China’s excessive government support for rice, wheat and corn, demonstrates again the Obama administration’s strong and continued commitment to enforcing the rules of global trade and protecting the interests and livelihoods of American farmers,” said U.S. Trade Representative Michael FromanMichael B.G. FromanUS trade rep spent nearly M to furnish offices: report Overnight Finance: Trump hits China on currency manipulation, countering Treasury | Trump taps two for Fed board | Tax deadline revives fight over GOP overhaul | Justices set to hear online sales tax case Froman joins Mastercard to oversee global business expansion MORE.

ADVERTISEMENT

“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,” Froman said.

The U.S. case criticizes China over the lack of information on how it actually administers the tariff-rate quotas, which are necessary to import medium- or short-grain rice, long-grain rice, wheat and corn at lower duty rates.

The Department of Agriculture estimates that China’s TRQs for these commodities were worth more than $7 billion in 2015. If the TRQs had been fully used, China would have imported as much as $3.5 billion worth of additional crops last year.

“Although China has become a significant market for our grain exports, we could be doing much better than we are today,” said Agriculture Secretary Tom VilsackThomas James VilsackUSDA: Farm-to-school programs help schools serve healthier meals OVERNIGHT MONEY: House poised to pass debt-ceiling bill MORE.

“China has frustrated exporters through generous price support and unjustified market restrictions,” Vilsack said.

In a separate but similar case, USTR announced that it has requested that the WTO establish a dispute settlement panel to examine China’s level of domestic support for their domestic producers of rice, wheat and corn. 

USTR launched that WTO challenge in September noting that China’s market price support for these commodities was estimated to be nearly $100 billion in excess of its WTO commitments.

Combined, China's domestic support measures and tariff-rate quota regime distort global markets for wheat, rice and corn, according to USTR’s analysis.

"Together with the action the administration took in September challenging Chinese agriculture subsidies, launching this case demonstrates that the United States will fight for fair trade for farmers and rural communities," said Sen. Ron WydenRonald (Ron) Lee WydenThe difference between good and bad tax reform Hillicon Valley: Trump meets Twitter CEO after slamming company | Kushner calls Russia probes more 'harmful' than election interference | Dem wants FTC to hold Zuckerberg 'liable' for data missteps | Sri Lanka faces tough questions over social media ban Treasury misses second Dem deadline on Trump tax returns MORE (D-Ore.), ranking member of the Senate Finance Committee. 

Compliance with WTO rules would lead to a reduction in the excessive domestic support provided to China’s grains producers and would bring Chinese production in line with market forces. Improvements to China’s TRQ administration would help provide fairer market access for U.S. and other exporters of these commodities. 

“China continues to ignore the commitments it made in joining the WTO,” said Rep. Michael Conaway, chairman of the House Agriculture Committee.

“Not only is China unfairly subsidizing its producers to the detriment of American farmers, they are also refusing to provide the market access they promised," Conaway said. 

The case is the 15th trade enforcement challenge brought against the Chinese government at the WTO since 2009.

United States rice, wheat and corn exports worldwide have averaged $20 billion per year.

These exports produce an estimated $70 billion in economic activity and support 200,000 jobs nationwide.