WTO rules against Chinese subsidies

American wheat growers are happy with the win, but problems with the WTO appeal process could spoil the party

ORLANDO, Fla. — U.S. wheat growers are celebrating a successful World Trade Organization challenge of China’s price supports but a Canadian official thinks it could be a short-lived victory.

A WTO dispute panel has ruled that Chinese government wheat, corn and rice payments to farmers exceed allowable limits and significantly distort global trade.

Chandler Goule, chief executive officer of the National Association of Wheat Growers, said the association was “very happy” with the ruling.

NAWG and U.S. Wheat Associates sponsored a 2016 Iowa State University study that determined China was paying its farmers US$10.40 per bushel for their wheat.

“If any of you all have looked at our current wheat price, we are nowhere near close to that,” he told reporters attending the 2019 Commodity Classic conference.

“I think our guys would be happy with $4 or $4.50.”

U.S. Wheat Associates is also thrilled with the WTO’s decision.

“U.S. wheat farmers have been hurt by China’s overproduction and protectionist measures for too long and it’s past time for China to start living up to its commitments,” USW president Vince Peterson said in a news release.

Goule said China’s support costs U.S. farmers US$640 million a year by preventing exports and reducing global wheat prices.

“We’re glad to see the WTO is holding China accountable for their actions that do not fall in line with that organization,” he said.

Goule expects China to appeal the ruling and that’s where things could get interesting.

Cam Dahl, president of Cereals Canada, said the WTO dispute resolution process is about to come to a grinding halt.

The U.S. believes the WTO is biased and is refusing to allow the appointment of new appellate body members.

There has to be a minimum of three appellate body members to hear a WTO appeal.

The standing body of seven members is down to three and the terms of service of two of those members expires on Dec. 10, 2019.

If that happens, China could refuse to adopt the WTO ruling because it has no way to appeal it.

The European Union has floated a couple of proposals backed by other WTO members on how to address the looming crisis but so far there is no agreement in place.

Dahl said the latest WTO ruling on China’s unfair wheat, corn and rice support is a “graphic example” why the dispute resolution system needs to be fixed in a hurry.

He said it is “absolutely critical” that countries be able to use the WTO’s dispute resolution process to bring rogue countries back into line.

Dahl doesn’t know to what extent Canadian wheat farmers are being hurt by China’s policies but he said they are definitely leading to overproduction and that weighs down global prices.

The U.S. Department of Agriculture estimates China will have 140 million tonnes of wheat stocks by June 2019, accounting for 52 percent of global supplies.

The U.S. has a second WTO case challenging China’s mishandling of its 9.6 million tonne annual tariff rate quota (TRQ) on wheat.

The U.S. claims China has been under-buying wheat through the TRQ to the tune of 130 million tonnes since China joined the WTO in 2001, which “not coincidentally” is about the size of its current reserves.

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