The U.S. Grains Council (USGC) strongly supports a decision announced Thursday by the World Trade Organization’s (WTO's) Dispute Settlement Body determining China administered its tariff-rate quotas (TRQs) for wheat, corn and rice inconsistently with its WTO requirements.
The report found that China’s TRQ administration is not transparent, predictable or fair and that it ultimately inhibits TRQs from filling, which is one factor denying U.S. farmers access to China’s market for corn and other grains.
This decision stems from consultations first requested by the U.S. government in 2016 based on findings and analysis done for the Council, U.S. Wheat Associates and the USA Rice Federation.
“The report is an important acknowledgement China has not fulfilled its obligations to allow for tariff-rate quotas for corn to be filled while maintaining high domestic corn prices consistently above international prices,” said Tom Sleight, Council president and CEO.
"We believe this is an example of the WTO working to help move us all toward a more open and fair market for grains."
As part of its WTO accession commitments, China agreed to eliminate import prohibitions and move to a system establishing TRQs for several crops including corn, wheat, rice, sugar, cotton and wool.
A share of China’s TRQ is allocated to private end-users while the rest is allocated to state-owned trading companies.
For corn, the TRQ specified in the accession agreement is 7.2 MMT, with 40 percent allocated to private end users (2.88 MMT) and the remaining 60 percent to state-owned trading companies.
The TRQ levels have not been adjusted since China’s accession to the WTO in 2001 and do not reflect prevailing demand.
The TRQs reserved for private sector (vs. state-owned enterprises) are in many cases too small to be commercially viable.
A lack of transparency and unpredictability in timing of quota distributions inhibits efficient use of the quotas and increases the cost of agricultural trade as traders are unsure of available import opportunities.
"The Council believes a stable market in which prices are determined by supply and demand as part of global dynamics will benefit the long-term development of China’s feed, livestock and corn-processing industries, as well as its consumers of animal and processed corn products,” Sleight said.
“A more open market is in both China’s best interest and that of our members, farmers and exporters.
On Dec. 15, 2016, the United States requested formal WTO consultations with China on the administration of its tariff-rate quotas for wheat, corn and rice.
In its request, the United States alleged China had failed to administer its TRQs for the three products in a way that would allow them to be filled.
At the heart of the U.S. case was China’s lack of transparency on the operation of its TRQs, specifically its poorly-defined criteria for applicants; unclear procedures for distributing TRQ allocations; and failure to announce quota allocations and reallocation results as required under China’s WTO obligations.
In the case of corn, a particular concern is the unused portion of the state-owned trading companies allocation is not reallocated on a consistent basis.
When the issues raised were not satisfactorily resolved through consultations that began in February 2017, the United States requested establishment of a WTO dispute panel in August 2017.
Hearings before the panel took place in July and October 2018.
"We appreciate the U.S. government officials working diligently to continue pursuing this issue at the WTO,” Sleight said.
“We would urge U.S. government officials to continue to examine China’s current TRQ administration process and discuss any issues they find with the Chinese government as part of the compliance requirements of the panel report."
For more information, please contact Bryan Jernigan at 202-603-3891.