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A farmer oversees a rice harvest in Yilaxi township in Jilin province in this 2018 file photo. Photo: Xinhua

US defeats China at WTO in vast grain-subsidy case, after accusing Beijing of US$100 billion price propping

  • The US said China’s ‘unfair’ subsidies to its rice and wheat farmers affected global markets
  • Washington hailed the ruling as a ‘significant victory for US agriculture that will help American farmers compete on a more level playing field’

The World Trade Organisation on Thursday sided with Washington in a dispute it filed three years ago over “unfair” Chinese subsidies to its producers of wheat and rice.

Back in 2016, the United States alleged that China doled out US$100 billion in “market price support” for wheat and rice as well as corn production, above levels agreed at the Geneva-based WTO.

Rice fields at Balong Village in southwest China’s Yunnan province. Photo: Xinhua

That in turn provided an artificial incentive for farmers to produce more, lowering prices elsewhere, the US said.

A panel established by the WTO’s Dispute Settlement Body to rule on the matter found Thursday that the grain subsidies provided by Beijing exceeded the accepted level, and that China had “acted inconsistently with its obligations” under international trade rules.

The experts said they had found that each year from 2012 to 2015, China’s market price support for wheat, Indica rice and Japonica rice “exceeded its 8.5 per cent de minimis level of support for each of these products.”

The WTO panel said it had not considered whether China had also exceeded the acceptable subsidies for corn producers, since it found China had removed the challenged subsidy before the US launched its complaint.

Both sides have up to 60 days to appeal Thursday’s ruling.

Agriculture Secretary Sonny Perdue hailed the WTO grain ruling as a victory for US farmers. Photo: AP

China had argued that it was not breaching that limit because only the grains procured by government should be counted as subsidised. The United States successfully argued that state buying at a guaranteed price affected the whole market.

The ruling, which may be appealed, could have ramifications for India, which has made similar arguments to China.

At a meeting of the WTO’s agriculture committee on Wednesday, the United States and Canada rejected India’s claim that its market price support for pulses was 1.5 per cent of the value of production, saying that it was actually 31 per cent to 85 per cent, far above allowed limits.

US Trade Representative Robert Lighthizer and Agriculture Secretary Sonny Perdue hailed the ruling in a statement as a “significant victory for US agriculture that will help American farmers compete on a more level playing field”.

“The United States proved that China for years provided government support for its grain producers far in excess of the levels China agreed to when it joined the WTO” in 2001, Lighthizer said.

Wheat fields in the county of Mori, in China’s Xinjiang province. Photo: Xinhua

“We expect China to quickly come into compliance with its WTO obligations,” he added.

China is the world’s largest producer of wheat and rice, holding significant sway over world markets.

The news of the WTO ruling comes as Washington and Beijing strive to reach a new trade agreement to avoid escalating their trade war.

After exchanging punitive tariffs on more than US$360 billion in total two-way trade, US President Donald Trump and his Chinese counterpart Xi Jinping declared a truce in December and agreed to hold off on further tariffs or retaliation for 90 days.

Trump announced Sunday that he would delay a planned further hike in tariffs on Chinese goods this week after he and Beijing both hailed “substantial progress” in trade negotiations.

Additional reporting by Reuters