China slow to comply in WTO tariff dispute

The WTO found the importer guilty of improperly managing its tariff rate quota (TRQ) on wheat, corn and rice. | Reuters photo

China continues to drag its feet on complying with a 2019 World Trade Organization ruling.

The WTO found the importer guilty of improperly managing its tariff rate quota (TRQ) on wheat, corn and rice.

China pledged to revamp its program by adhering to the rules and making it more transparent. But the U.S. says that has not happened.

On July 26, the U.S. asked the WTO Dispute Settlement Body for authorization to raise tariffs on a variety of Chinese imports in retaliation for China’s failure to comply with the body’s recommendations regarding the TRQ program.

China has blocked that request, triggering an arbitration panel. China has also requested that a second panel be formed to review whether it has brought its policies into compliance.

China’s TRQ on wheat is 9.64 million tonnes. That is the amount that can be imported from around the world at a paltry one percent duty. Anything above that amount faces a stiff 65 percent duty.

The country is estimated to have imported 10.5 million tonnes of the crop in 2020-21 and is forecast to purchase another 10 million tonnes this year. That is about double the volume of 2019-20.

So what’s the problem? There is still a lack of clarity on how the TRQ is being allocated to state trading enterprises and then reallocated to other private importers.

“It’s great that they’re importing at that level,” said Ben Conner, partner with DTB AgriTrade, a consulting firm focused on agricultural trade policy and one of the first voices to point out the problems in China.

“But for trade policy it’s a long-term game.”

Just because trade is flowing now doesn’t mean it will be in 20 or 30 years unless the TRQ program is permanently fixed.

“They’re supposed to allow imports by private entities and it’s not clear to what extent they’re allowing that to happen,” he said.

China lost another WTO case in 2019 when it was determined that the country provides price supports for farmers in excess of its WTO commitments.

The U.S. is also seeking permission from the WTO to retaliate for China’s failure to comply with that ruling.

The two cases are closely linked. China doesn’t want to allow low-priced imports into the country because it counteracts the efforts they are taking to prop up corn and wheat prices for their farmers.

Conner said these WTO disputes can drag on for years. They were originally launched in 2016.

But while the dispute settlement process can be lengthy and frustrating, he feels it is an underutilized way to get meaningful and effective policy changes out of developing countries.

“It would benefit ag sectors in a number of countries if we used those tools more,” he said.

India is another flagrant violator of WTO rules. When the country has a bumper crop it tends to introduce policies that restrict imports, a practice that has directly affected Canada’s farmers on a number of occasions.

Connor said the U.S. has been working with Canada to bring India’s pulse price supports into compliance with its WTO obligations.

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