China Admits Exceeding Agricultural Domestic Support Limits

Text "Sunlight is the best disinfectant" on yellowed book page
Shine on
Jan 02, 2019
WASHINGTON, DC -- After a substantial delay in notification to the World Trade Organization (WTO), last month China made public its 2011-2016 agricultural domestic support notifications.  In all six of these notifications, China’s support exceeded its WTO commitments.   

Chinese domestic agricultural support comes mainly in the form of price support and government procurement.  The Chinese government buys crops if the price falls to a government-announced minimum.  This inflates the price of various Chinese commodities, creating artificial incentives for Chinese farmers to increase production.

In 2016, the U.S. brought a case to the WTO regarding China’s high levels of domestic support for corn, wheat, and rice producers.  The U.S. argued that China’s support of these three crops exceeded permissible levels by nearly $100 billion.  China’s recent notifications show that it did in fact go over its support commitment for those years ($21 billion in 2015) but China did not note any change in its methodology for calculating domestic support, which is a fundamental aspect of the U.S. case against China.  The WTO is expected to make a final decision on this case within the next couple months.

Over the past several years, China has overhauled its subsidy programs, cutting and eventually eliminating the minimum prices for corn, cotton, and soybeans.  In 2017, Beijing began to cut minimum prices for rice for the first time and further cut prices by 2-9 percent in 2018.

“When China joined the WTO, it committed to implementing an agriculture regime that would facilitate market access consistent with international obligations and yet it has continued to frustrate the U.S. rice industry through an improper support system,” said Bobby Hanks, chairman of the USA Rice International Trade Policy Committee.  “While it’s promising to see them overhauling their subsidy programs, it doesn’t nullify the harm it’s caused our industry over the past several years, or the need for them to fully comply with their WTO commitments.”