China is a dominant force in U.S. agricultural trade, but it seems to continue trying to set its own rules. When China doesn't follow the world rules it has been asked to follow, U.S. farmers are the ones at a disadvantage.
Over the last month, there have been some interesting developments in the U.S.-China relationship. The most significant came when the U.S. decided to file a World Trade Organization challenge against China's domestic policies for corn, wheat and rice. According to the U.S. Trade Representative, China was exceeding its maximum allowable support by $100 billion in 2015.
Farm Policy Facts said it most succinctly: “The ENTIRE farm safety net spending for 2015 for the United States was about $12 billion, which is well below our limits agreed to in the WTO, whereas China went OVER its limits on just THREE crops by $100 BILLION in that same year!”
If you think the action against China would encourage the country to slow down on its protectionist ways, think again. On Sept. 18, it was reported that "the Agricultural Development Bank of China, one of the country's main policy lenders, agreed to loan at least 3 trillion yuan ($450 billion) by 2020" for the further modernization of China's agriculture industry.
Just days later, China's Ministry of Commerce (MOFCOM) issued a preliminary determination claiming that U.S. dried distillers grains with (or without) solubles (DDGS) were being dumped and have caused injury to China's DDGS industry.
Starting Sept. 23, product importers had to make a deposit with Chinese customs authorities of 33.8% of the import value of the DDGS. The action followed a preliminary determination that U.S. subsidies had “substantially” harmed domestic producers in China.
In a joint statement, the U.S. Grains Council, the Renewable Fuels Assn. and Growth Energy said they are “deeply disappointed” in the ruling. "We are confident that U.S. DDGS are not being dumped and are not causing or threatening injury to Chinese producers,” the groups said.
"As part of our three-decade-long partnership with China, we have worked closely with government agencies, industry associations and the feed and livestock industries in China to educate stakeholders about the benefits of both imported and domestic DDGS as an alternative feed ingredient,” the groups said.
China's MOFCOM also announced that it will extend antidumping measures on imports of U.S. broiler chicken products for a further five years, effective from Sept. 27. According to the National Chicken Council (NCC), China first imposed the duties on chicken imports from the U.S. in September 2010, claiming that chicken was subsided in the U.S. and then dumped on the Chinese market at prices below fair market value.
MOFCOM said Aug. 22 China would extend anti-subsidy measures on imports of U.S. broiler chicken products for a further five years, effective from Aug. 30.
In May 2016, USTR Ambassador Michael Froman mounted a WTO challenge to China because of the Chinese government's failure to bring its antidumping and countervailing duties against imports of U.S. chicken into compliance with WTO rules.
In 2013, a WTO dispute settlement panel found that China's antidumping and countervailing duties violated its WTO obligations. Despite that decision, China continues to refuse to remove these duties, NCC said.
China has sold its cotton and corn from state stockpiles, which has flooded world markets. Next on the list: sugar. By Oct. 1, China Daily reported, "Chinese authorities will release the first batch of sugar reserves this year to stabilize supply and prices, the country's top economic planner announced on Friday. China will sell 350,000 tons of sugar from state reserve at 6,000 yuan ($900) per tonne, according to the National Development & Reform Commission."
Farm Policy Facts stated, “When the Chinese government uses phrases like 'stabilize supply and prices,' it really means 'manipulate the market to subsidize its industry.'”
If there was one step in the right direction, it may have been China's decision to lift a ban on imports of U.S. bone-in beef from cattle under 30 months of age; however, China has yet to determine the terms of trade.
Philip Seng, president and chief executive officer of the U.S. Meat Export Federation (USMEF), said while the move is an important first step in the process of resuming beef exports to China, "USMEF understands that China must still negotiate with (the U.S. Department of Agriculture) the conditions that will apply to U.S. beef exports entering this market." More roadblocks ahead?
In testimony Oct. 5 at the U.S. Trade Representative's (USTR) annual public hearing on China's compliance with WTO commitments, U.S Wheat Associates President Alan Tracy highlighted additional Chinese policies that hinder U.S. wheat exports notably troublesome administration of their 9.64 million metric ton wheat tariff rate quota (TRQ). Upon its accession to the WTO in 2001, China agreed to implement a TRQ for wheat at a 1% duty with specific provisions intended to ensure the Chinese government couldn't artificially restrict imports through government owned companies.
Those provisions included transparency and reallocation mechanisms that should allow the TRQ to fill under today's market conditions, with China's domestic wheat prices nearly double international prices. Tracy encouraged additional work on TRQ barriers saying, "The value of a successful challenge of China’s subsidy programs will be significantly impaired unless China also removes its other restrictions on wheat imports."
China does not play by the rules set by others. Much of the push for the U.S. to support the Trans-Pacific Partnership (TPP) was to ensure that China doesn't set the rules in the region while the U.S. does. You can bet that if China had its way, it would be more than happy to see the U.S. left out of the expanding regions that are involved in the TPP deal.
Someone has to stand up to China, because it will American farmers who are getting hurt in the wake of China's game of setting its own rules if we don’t.