US challenges Chinese wheat, rice, corn price supports at WTO

WASHINGTON (REUTERS) - The United States on Tuesday (Sept 13) launched a challenge to China's price supports for domestic wheat, corn and rice at the World Trade Organisation, charging that these far exceed limits that China committed to when it joined the WTO in 2001.

The move opens a new front in the increasingly tense trade relations between the world's two largest economies, with disputes ranging from Chinese overcapacity in steel and aluminum to Chinese anti-dumping duties on American broiler chickens.

The US Trade Representative's office said China's "market price support" for wheat, corn and rice was estimated to be nearly US$100 billion (S$136 billion) above the WTO limits and constitutes an artificial government incentive for Chinese farmers to increase output, lowering prices worldwide.

It said it found that China's domestic price supports for wheat, Indica rice, Japonica rice and corn have all exceeded the 8.5 per cent "de minimis" level allowed under the WTO commitment for every year since 2012.

The first step in its formal WTO complaint is to seek formal consultations with Chinese officials to try to resolve the dispute without litigation.

"These programmes distort Chinese prices, undercut American farmers, and clearly break the limits China committed to when they joined the WTO," US Trade Representative Michael Froman said in a statement.

"We will not stand by when our trading partners fail to follow the rules like everyone else."

US wheat industry trade groups estimate that the Chinese price supports guarantee Chinese farmers about US$10 per bushel, artificially boosting production and lowering world prices. They cited University of Iowa research showing this cost US farmers about US$653 million in lost revenue last year.

On Monday, the US Department of Agriculture said US farmers would receive an average price of US$3.30 to US$3.90 a bushel for wheat in the marketing year that started on June 1.

The action marks the Obama administration's 23rd trade enforcement challenge lodged with the WTO since 2009, and the 14th against China. The administration is keen to show that it will vigorously enforce trade agreements as it makes a final push for Congress to pass its Trans-Pacific Partnership trade deal.

US lawmakers from both parties applauded the move.

"When I have to go out and defend trade agreements, the single most important story I can tell is we are enforcing the agreements that we have," said Senator Heidi Heitkamp, a North Dakota Democrat. "The message is sent: we will take aggressive action in the WTO when we see trade policy fail."