Canadian wheat groups don’t have the same appetite as their U.S. counterparts for launching a trade dispute against China.
U.S. Wheat Associates and the National Association of Wheat Growers are working with the Office of the U.S. Trade Representative and the U.S. Department of Agriculture to develop a possible World Trade Organization challenge against the Asian country.
A January 2016 update of a 2015 study by Iowa State University shows China’s production-distorting wheat subsidies are costing U.S. wheat growers US$653 million a year, up from $548 million in the original study.
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“The studies we have sponsored clearly show the problem is growing more serious at the worst time for farmers who are already facing unprofitable prices,” USW president Alan Tracy said in a news release.
NAWG president Gordon Stoner said wheat prices have collapsed to unsustainable levels, partially because of trading partners failing to play by WTO rules.
“The decline in income of every wheat farmer in the United States will accelerate if China’s policies are not brought back into compliance with the commitments China’s government made to its trading partners,” he said.
The damage isn’t limited to U.S. growers. The study shows China’s domestic support policies are costing Canadian farmers $252 million a year.
However, Canadian wheat groups are not nearly as eager to launch a WTO challenge.
“I’m not sure that from our perspective as Canadians there would be as much to be gained as there might be to be lost in pursuing something like that,” said Tom Steve, general manager of the Alberta Wheat Commission.
“What my board of directors would say is we should focus our efforts on getting a (bilateral) trade agreement with China.”
USW says China pays its farmers a minimum procurement price of more than $10 per bushel for their wheat and also subsidizes input costs.
It says China provides an aggregate measure of support of $15.4 billion, or 36 percent of the value of production, which far exceeds its WTO commitment of 8.5 percent.
The policies are encouraging more wheat production from the world’s largest wheat producer at a time when China already controls almost 40 percent of global wheat stocks.
Cam Dahl, president of Cereals Canada, agreed that China’s support programs are production distorting.
“There is no question that those support programs have hurt Canadian agriculture,” he said.
Dahl believes the proper way to get China back in line is to finalize the Doha round of WTO negotiations.
“It’s impossible to get to those distorting programs unless we have the broad table set through the WTO,” he said.
Dahl acknowledged that Canadian wheat groups have not been as vocal about the subsidy issue as their U.S. counterparts because they need to focus on other priorities due to limited resources.
“There are only so many balls at once that we can have in the air, and that’s just simply what it comes down to,” he said.
Dahl also said the United States is expected to have one of its highest wheat ending stocks in decades, while Canada is expected to have one of its lowest. As a result, the lack of grain movement is a more pressing issue south of the border.
Steve said USW and NAWG are mature farm groups that have the finances and staffing to devote to such issues, while the newly minted Canadian wheat groups are focusing on market development activities and forging value chain relationships in the post-Canadian Wheat Board environment.
A WTO challenge would be a lengthy and costly process, he added.
USW said China’s transgressions go beyond price and input subsidies. The country agreed to a one percent tariff on up to 9.64 million tonnes of wheat imports, but imports fall well below the quota, even when China’s domestic prices are well above world market prices.
Study author Dermot Hayes said Chinese farmers would grow less wheat if their government eliminated its price and input subsidies, and the country would need to increase its imports to around the quota limit of 9.64 million tonnes.
“That would increase wheat exports and farm revenue in the United States as well as in Europe, Canada and Australia,” he said in the USW news release.
sean.pratt@producer.com
