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United States Challenges Chinese Grain Tariff Rate Quotas for Rice, Wheat, and Corn

Obama Administration files second complaint on behalf of American farmers, alleging China has failed to meet WTO market access commitments for rice, wheat, and corn

New effort marks the 15th time the Obama Administration has launched a trade enforcement challenge against the Chinese government at the WTO since 2009

Office of the United States Trade Representative (USTR) also advances dispute settlement proceeding on China’s excessive support for rice, wheat, and corn

Washington, D.C. – Today, the Obama Administration launched a new trade enforcement action against the People’s Republic of China at the World Trade Organization (WTO) concerning China’s administration of tariff-rate quotas (TRQs) for rice, wheat, and corn.  The complaint filed by the Office of the United States Trade Representative (USTR) charges that China’s administration of its TRQs for these commodities breaches China’s WTO commitments and undermines American farm exports.  The United States is launching this trade enforcement challenge to hold China to its trade commitments and help level the playing field for American rice, wheat, and corn farmers.  Today’s announcement marks the 15th trade enforcement challenge the Obama Administration has launched against China at the WTO.

“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 United States Trade Representative Michael Froman. “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. The United States will aggressively pursue this challenge on behalf of American rice, wheat, and corn farmers.”

The United States Department of Agriculture (USDA) estimates that China’s TRQs for these commodities were worth over $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 alone.

“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,” said Agriculture Secretary Tom Vilsack. “Although China has become a significant market for our grain exports, we could be doing much better than we are today. When China joined the WTO, it committed to implementing an agriculture regime that would facilitate market access consistent with international obligations. However, China has frustrated exporters through generous price support and unjustified market restrictions. Taking action against grain price supports was one piece of the puzzle, and now we must confront China’s improper administration of its TRQs to ensure that our grains have the meaningful market access that China bound itself to as a member of the WTO. Today’s announcement is another step towards advocating for fairness in the global trading system on behalf of American farmers.”

In a separate matter, USTR also announced today that it has requested that the WTO establish a dispute settlement panel to examine China’s level of domestic support for Chinese producers of rice, wheat, and corn. USTR launched a WTO challenge on this matter in September 2016, noting that China’s market price support for these commodities was estimated to be nearly $100 billion in excess of its WTO commitments. According to USTR’s analysis, China's domestic support measures and non-transparent TRQ regime work together to distort global markets for wheat, rice and corn. Compliance with WTO rules would lead to a reduction in the excessive domestic support provided to China’s grains producers to bring Chinese production in line with market forces, and improvements to China’s TRQ administration would facilitate market access for U.S. and other exporters of these commodities. 

"In September, I joined in the bipartisan call for China to be held accountable to their World Trade Organization commitments. Today's enforcement action on China's administration of tariff-rate quotas for wheat, corn, and rice appears to be yet another example of China's refusal to play by the rules,” said Senator Pat Roberts, Chairman of the Senate Committee on Agriculture, Nutrition, and Forestry. “I am committed to working with our producers and alongside USDA and USTR as we continue to fight for U.S. farmers' ability to compete in the global market on a level playing field."

“China continues to ignore the commitments it made in joining the WTO,” said Representative K. 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.  We have been sounding the alarm, and I am pleased to see USTR taking action to hold China accountable.”

"We need to hold China accountable for unfair trade practices that hurt American farmers,” said Senator Debbie Stabenow, Raking Member of the Senate Committee on Agriculture, Nutrition, and Forestry. “I applaud the USTR for taking steps today to level the playing field so that our businesses can create jobs and compete in the global economy." 

"China's strategy of gaming the system makes it virtually impossible for Oregon wheat growers and other American farmers to get the market access China promised when it joined the WTO,” said Senator Ron Wyden, Ranking Member of the Senate Finance Committee. “That access is essential to the livelihoods of farms and rural communities across the nation. 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."

"An equal playing field is vital for America's farmers to compete in a global marketplace," said House Agriculture Committee Ranking Member Collin Peterson. "It is imperative that the United States take this action to hold China accountable for failing to meet WTO commitments."

"Today we're again standing up and working to hold China accountable for cheating North Dakota farmers," said Senator Heidi Heitkamp, member of the Senate Committee on Agriculture, Nutrition, and Forestry. "When China or any other country cheats on a trade agreement, they make it harder for North Dakota wheat and corn farmers to access markets and get fair value for our state's top-notch crops. This is the second time the U.S. Trade Representative has brought an agricultural compliance case against China this year, and that's good news for North Dakota farmers and rural communities – especially when commodities prices are already challenging."

“I welcome this USTR action against China’s misadministration of tariff-rate quotas for rice, wheat, and corn. It is not the first, nor will it be the last, enforcement action brought against China, which routinely adopts protectionist policies ranging from unscientific regulations on biotech products to excessive market price supports for agriculture commodities,” said Representative Adrian Smith, member of the House Ways and Means Committee and Chair of the Modern Agriculture Caucus. “China represents a large and growing market for American producers, and our involvement in trade negotiations and institutions such as the WTO is what enables us to hold our trading partners accountable. We must continue to remain a vigilant and engaged actor in the international economy to ensure a level playing field for our farmers and ranchers.”

Overall, the Obama Administration has launched 24 trade enforcement challenges at the WTO since 2009 – more than any other country in the world over that period. USTR has won every trade enforcement challenge decided so far at the WTO, worth billions of dollars in trade opportunities for U.S. exporters. READ MORE about the Obama Administration’s trade enforcement record.

Challenging Chinese Grain Tariff Rate Quotas for Rice, Wheat, and Corn

In an effort to level the playing field for American farmers and hold the Chinese government to its trade commitments, USTR this week launched a new trade enforcement challenge at the WTO. This new challenge contends that China’s opaque and unpredictable management of TRQs for rice, wheat, and corn is inconsistent with WTO rules.

According to USTR’s analysis, China appears to administer its TRQs – which are necessary to import medium- or short-grain rice, long-grain rice, wheat, and corn at lower duty rates – in a manner inconsistent with the commitments in China’s Accession Protocol and the General Agreement on Tariffs and Trade 1994 (GATT 1994). China announces on an annual basis the opening of tariff-rate quotas. However, China’s application criteria and procedures are unclear, and China does not provide meaningful information on how it actually administers the tariff-rate quotas.  China’s administration of short- and medium-grain rice, long-grain rice, wheat, and corn TRQs is not transparent, predictable or fair. 

China also appears to have breached its GATT 1994 obligations by administering TRQs in an unreasonable manner, by maintaining impermissible restrictions on importation, and failing to provide notice of the total quantities permitted to be imported and changes to the total quantity permitted to be imported.  China’s failure to comply with WTO rules means that traders are not able to enjoy full access to China’s tariff-rate quotas.

Despite lower global prices that favor the importation of grains into China, the TRQs for each commodity persistently do not fill.

 

China’s Tariff-Rate Quotas Do Not Fill

  •  

Total TRQ

(metric tons)

  1.  
  1.  
  1.  
  1.  
  1.  
  •  

7,200,000 MT

  1.  
  1.  

45%

36%

65%

  •  

9,636,000 MT

  1.  
  1.  

57%

31%

30%

Rice (long-grain)

2,660,000 MT

21%

83%

65%

59%

92%

Rice (short- and  medium-grain)

2,660,000 MT

1%

6%

21%

38%

35%

[Source: China’s WTO Schedule CLII and Chinese Customs Data]

During China’s accession to the WTO, it agreed to permit 2,660,000 metric tons (MT) of short- and medium-grain rice, 2,660,000 MT of long grain rice, 9,636,000 MT of wheat, and 7,20,000 MT of corn to enter China at lower “in quota” duty rates through its TRQs. Based on 2015 Chinese import prices, the total annual value of these TRQs was $2.99 billion for wheat, $ 1.13 billion for short- and medium-grain rice, $1.01 billion for long grain rice, and $1.90 billion for corn. The new U.S challenge launched today addresses whether China’s administration of the TRQs provides farmers around the world market- oriented access to the Chinese market.

Challenging Excessive Domestic Support for Rice, Wheat, and Corn

In a separate matter, USTR this week has requested that the WTO establish a dispute settlement panel to consider whether China provides “market price support” for Indica (long-grain) rice, Japonica (short- and medium-grain) rice, wheat, and corn in excess of China’s domestic support commitments. China’s excessive market price support for these products inflates Chinese prices above market levels, creating artificial government incentives for Chinese farmers to increase production. In 2015 alone, China’s “market price support” for these products was nearly $100 billion in excess of the levels to which China committed during its accession to the WTO.

The United States requested consultations with China on September 13, 2016, regarding China’s provision of domestic support in excess of its WTO commitments. The parties held consultations on October 20, 2016, in Geneva, Switzerland.  The dispute was not resolved in consultations, and requesting a panel is the next step in the WTO dispute settlement process. The WTO Dispute Settlement Body will consider the U.S. panel request at a meeting scheduled for December 16, 2016.

READ MORE about the United States’ challenge, including additional details about how China’s excessive domestic support for rice, wheat, and corn breach its WTO commitments.

Economic Impact of United States Rice, Wheat, and Corn Exports

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. These agricultural sectors are essential to the overall strength of the nation’s economy, and to rural communities seeking ways to access new customers in foreign markets.

The Obama Administration’s Trade Enforcement Record

  • Since President Obama was inaugurated in 2009, USTR has filed 24 enforcement complaints (including this one) at the World Trade Organization (WTO) – more than any other WTO Member. The United States has won every single one of those complaints that have been announced by the WTO so far.
     
  • The Obama Administration has now brought 15 trade enforcement challenges against China, three against India, and several other complaints against a series of major economies including Indonesia, Argentina, the Philippines, and the European Union. To ensure the greatest economic benefits for American workers and exporters, the Obama Administration has used our trade enforcement actions to emphasize opening these large, strategic markets to which the United States exports a diverse array of products and services.
     
  • The Obama Administration has also broken new ground on the enforcement of agricultural market access including the challenge to China’s TRQ administration and excessive domestic support for production of certain grains, cases against India’s non-science-based measures on poultry and other products allegedly to protect against avian influenza (U.S. prevailed in 2015), Indonesia’s import licensing regime on beef, poultry, and horticultural products (case pending), and China’s unfair taxes on U.S. broiler chicken products (U.S. prevailed in 2014; compliance challenge pending).
     
  • Enforcement extends far beyond formal disputes. The Obama Administration has opened markets for American workers, farmers, and businesses by taking tough stands to resolve unwarranted trade barriers with trading partners. For example, we have eliminated restrictions in 17 countries since January 2015, gaining additional market access for U.S. beef in Brazil, Colombia, Costa Rica, Egypt, Guatemala, Iraq, Lebanon, Macau, New Zealand, Peru, Philippines, Saint Lucia, Saudi Arabia, Singapore, South Africa, Ukraine, and Vietnam. As a result, U.S. beef exports have doubled. We also successfully engaged with the Philippines – including through the Special 301 process – to enhance protection of intellectual property rights. These and similar actions have helped expand exports and level the playing field for American goods and services.