On September 13, 2016, the United States filed a complaint with the World Trade Organization (WTO) alleging that China has unfairly subsidized the production of Chinese rice, wheat, and corn. The U.S. government’s complaint takes issue with China’s “market price support” subsidy program, in which the Chinese government sets the minimum price at which it will purchase rice, wheat, and corn from Chinese farmers above the prevailing world market price for these crops.
As with many industries within China that are plagued with overcapacity, including steel, aluminum, and solar, China’s provision of massive subsidies and its interference in the grain industry has led to significant over production by Chinese farmers. Indeed, since 2012, China has regularly used its “market price support” subsidy program to manipulate agricultural production decisions within the country and encourage the production of rice, wheat, and corn beyond the level of what would otherwise occur. Ultimately, China’s market price support subsidy program has distorted its domestic market for these crops, displacing imports and limiting opportunities for U.S. products to satisfy China’s import demand for rice, wheat, and corn.
When China joined the WTO, it agreed that it would not provide trade-distorting subsidies to the grain industry above the de minimis level of 8.5 percent. But according to the United States government, China has significantly exceeded this level of support to its local farmers in each of the last four years. In 2015, China provided over $100 billion of support to its rice, wheat, and corn industries.
U.S. rice, wheat, and corn exports collectively represent $20 billion annually and support over 200,000 American jobs. But China’s provision of agricultural subsidies that essentially limit access to its market can have negative effects on American workers and their communities. According to a 2016 study sponsored by the U.S. Wheat Associates, China’s “market price support” subsidies cost U.S. wheat farmers approximately $650 million in revenue annually.
Since 2009, the U.S. government has challenged China’s unfair trade practices on 13 separate occasions and has won every single case – ranging from export restrictions on rare earths to the imposition of duties on U.S. chicken products. Another U.S. win before a WTO panel would bring the U.S. rice, wheat, and corn industries one step closer to competing on a level playing field to supply China’s import demand for these crops.