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US files trade complaint over China's 'excessive' ag subsidies

Farmers sow in a paddy field on May 10, 2016 in Wuchang, China.
Xiaolu Chu | Getty Images
Farmers sow in a paddy field on May 10, 2016 in Wuchang, China.

The U.S. on Tuesday accused China of having unfair agricultural subsidies for three key crops, adding to growing tensions between the two nations.

The complaint comes in a U.S. presidential election year when there's been China bashing by some candidates, including Republican presidential contender Donald Trump. His opponent, Democratic candidate Hillary Clinton, also has been vocal on trade issues and the need to keep jobs from going overseas.

In making the accusations Tuesday, the Obama Administration filed a complaint with the World Trade Organization over China's "excessive government support" for the local production of wheat, corn and rice. The administration alleges the excessive subsidies are hurting American farmers.

"China's excessive market price support for rice, wheat, and corn inflates Chinese prices above market levels, creating artificial government incentives for Chinese farmers to increase production," U.S. Trade Representative Michael Froman said in a release.

Froman noted that China exceeded its allowable subsidy limits on corn, rice, and wheat by $100 billion in 2015 alone. America's rice, wheat, and corn industries typically average $20 billion per year in export activity, according to government figures.

U.S. Department of Agriculture Secretary Tom Vilsack said in a release that China's policies have "resulted in significant losses to American producers."

"Through tariff cuts and the removal of other trade barriers, China has gone from a $2-billion-a-year market for U.S. agricultural products to a $20-billion-plus market," Vilsack said. "But we could be doing much better, particularly if our grain exports could compete in China on a level playing field."

To level the playing field for U.S. farmers, he urged China "to operate a WTO-consistent trade regime."

U.S. Grains Council President and CEO Tom Sleight issued a statement that said the trade group welcomes the government's "move on this critical issue. We are hopeful that this step and our ongoing work in China can continue to support a long-term, stable and mutually-beneficial trading relationship."

USA Rice President and CEO Betsy Ward said, in a statement, that the enforcement action also sends "a clear signal to other countries with whom we compete and who are not living up to their WTO obligations with regard to rice, such as Viet Nam, Thailand, and India."

Ward added, "Despite years of work by USA Rice and USDA to open the Chinese market, we still have no access for U.S. grown rice."

There's been bipartisan criticism from lawmakers about China's trade policies, and last year the House Agriculture Committee held a series of hearings to review foreign ag subsidies and their impact on the U.S. farm sector.

"I am grateful that the U.S. government has opened a case concerning China's treatment of corn, rice, and wheat," said House Agriculture Committee Chairman K. Michael Conaway (R-Texas) said in a release. "And, I do believe that this must only be a start because I believe that this is really just the tip of the iceberg in terms of the predatory practices going on around the world that harm our producers."

Meantime, China has been a big importer of American soybeans this year. U.S. ag exports to China are forecast $3.5 billion higher than fiscal year ending Sept. 30, primarily due to increased soybean, tree nuts, and pork exports.

Overall, the USDA forecasts ag exports to China will reach $21.5 billion in fiscal 2017, or $3.5 billion higher than the fiscal 2016 forecast, edging out Canada as the largest U.S. market.

Since 2009, the Obama Administration has brought 23 enforcement actions at the WTO, according to Froman. And the government's release indicated the U.S. has won every one of these disputes decided thus far.