USTR Pledges to Crack Down on China's Agriculture Subsidies

International Trade Daily™ provides rapid, reliable notification of the most significant developments affecting U.S. trade and international business policy, as well as the policies of major U.S....

By Bryce Baschuk

Oct. 17 — Countries should no longer ignore the rise of China's trade-distorting farm subsidies, the top U.S. trade official, Michael Froman, said in Geneva.

“When major emerging economies are providing trade-distortive agricultural subsidies at a greater volume than all of the developed countries put together, we can no longer turn a blind eye,” Froman said Oct. 17 during speech sponsored by the Geneva Graduate Institute.

“We have found that China is providing nearly $100 billion per year in highly trade-distortive subsidies above and beyond their WTO limits,” U.S. Trade Representative Froman said. “How can we have a serious conversation about distortions to global agricultural trade if we pretend that trade-distortive subsidies at this level don't exist?”

Froman's remarks may further dampen expectations for a near-term World Trade Organization agreement to reduce domestic support policies in line with the goals of the Doha Development Agenda.

China Support High

Last month the U.S. filed a WTO dispute against China for allegedly violating the terms of its 2001 accession agreement by providing more than $100 billion in trade-distorting domestic support in excess of its WTO commitments (178 ITD, 9/14/16).

The U.S. case alleged that between 2012 and 2015 Beijing supported farmers at levels that were substantially above China's WTO commitment to cap such subsidies at 8.5 percent of the value of production.

WTO rules generally permit countries to maintain de minimis levels of domestic support of up to 5 percent of the value of production for developed countries and up to 10 percent for developing countries.

Though China is considered a developing WTO country, it agreed to a stricter level of 8.5 percent as part of its 2001 WTO accession agreement.

Per Capita Question

Chinese Ambassador to the WTO, Yu Jianhua, urged Froman to consider the disparity between the per capita difference in subsidies offered to U.S. and Chinese farmers during a question and answer session.

“One fact we must not ignore as far as domestic support is concerned — for each Chinese farmer they receive less than $100 in subsidies, while the U.S. gives more than $20,000 in subsidies for each farmer,” Jianhua said.

Froman responded that “that's why we have green boxes and amber boxes and that's why some subsides are considered trade-distorting and other subsidies are not.”

Under WTO rules amber box support, also known as aggregate measure of support (AMS), is considered the most trade-distorting form of subsidization because of its direct links to prices and production. Green box subsidies are not considered to be trade-distortive.

“We put a proposal on the table last year to try and get the conversation going on domestic support,” Froman said. “It did not attract a consensus among WTO members but we are open to ideas and continue to talk about the need to address that issues as well as and in the context of addressing other issues such as market access.”

WTO Agriculture Talks

Geneva trade officials say an agreement on farm subsidies is crucial to advancing any package of trade deals at the WTO's 2017 ministerial meeting in Argentina.

Since 2001, WTO members have sought to achieve “substantial reductions” of trade-distorting domestic support, in line with the goals of the Doha Development Agenda.

Despite the ambitions of the Doha Round, its domestic support pillar has ranked among the most deadlocked areas of the agriculture negotiations, in part because of the dramatic increases in payments from large, emerging economies like China and India.

Earlier this month, the chairman of the WTO's agriculture negotiating committee, Vangelis Vitalis, noted that he had seen no shift in that the state of the negotiations—which largely hinge on the willingness of China and the U.S. to modify their farm subsidies policies.

To contact the reporter on this story: Bryce Baschuk in Geneva at correspondents@bna.com

To contact the editor responsible for this story: Jerome Ashton at jashton@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.