US: Take countries to task over exceeding wheat support limits

PHOENIX, Ariz. — U.S. Wheat Associates says it might be time to take some of the top wheat producing nations to task for flagrantly violating their World Trade Organization obligations.

India, China, Turkey, Brazil and Thailand have dramatically in-creased trade-distorting subsidies and are failing to report those subsidy levels to the WTO, it said.

China has exceeded its allowable aggregate measure of support on wheat, corn, rice and other crops by an estimated $48.4 to $109.8 billion in the last two crop years, according to a new study commissioned by USW.

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USW president Alan Tracy said China is paying its growers US$385 per tonne for their wheat.

“I imagine that some of your (Canadian) growers would welcome that kind of guarantee,” he said in an interview at the 2015 Commodity Classic.

India’s price-distorting subsidies were $36.1 billion to $93.4 billion over the same two-year period.

“The developing countries are the primary subsidizers and distorters of trade and they’re depressing prices for everybody,” said Tracy.

“They’re the ones that have been increasing their domestic support way beyond levels that were agreed to in the Uruguay round.”

Tracy said it might be time for the United States, Canada and Australia, which are three of the top five wheat exporting nations, to take the offending countries to WTO dispute settlement for their lack of reporting and excessive market-distorting subsidies.

“We’ve had a lot of interest in the study from both Canadian and Australian sources,” he said.

The U.S. used to be one of the biggest culprits when it came to subsidies, but times have changed.

The country has never exceeded its aggregate measure of support limit of $19.1 billion.

“We haven’t come close to that lately,” said Tracy.

“The old image as the major subsidizers is out of date.”

Tracy said even the European Union has made strides, noting that it recently signed a free trade pact with Canada committing to a zero tariff for wheat.

It wouldn’t do that if it was planning to continue heavily subsidizing its wheat producers because EU wheat would be uncompetitive, he added.

“They’re becoming much more market oriented,” said Tracy.

USW found that developing countries are also guilty of failing to report their annual crop subsidies or purposely misrepresenting them.

More than 640 notices were late as of November 2014.

China has not reported its subsidies since 2008, while Turkey’s last report was 2001. The U.S., by contrast, faithfully files its reports every year.

India submitted a notification last fall covering seven crop years and is now current to 2010, but the country used faulty methodology, according to USW.

India pays its wheat growers a subsidized price of $280 to $285 per tonne for their wheat.

The country took the difference between that price and the market price and multiplied it only by the amount of wheat that the government buys directly from its farmers.

Tracy said it is supposed to multiply it by all the wheat sold in the country because government subsidies tend to inflate prices across the board in India.

“India used this frankly dishonest approach to show that they’re under their limits,” he said.

Tracy said the new reality of developing countries being the heavy subsidizers wasn’t contemplated in the original draft of the Doha round of trade negotiations.

That is why U.S. negotiators are reluctant to use the eight-year-old document as the starting point for discussions to finalize a global pact.

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