Trade Enforcement Action Called Against China

Yesterday it was announced that the Obama Administration has called for trade enforcement action against China at the World Trade Organization. U.S. Trade Representative Michael Froman says

Froman: "The excessive government support that China provides their growers exceeds the firm commitments it made when it joined the WTO in 2001. Then China committed specifically to provide trade distorting domestic support not above a level of 8.5 percent the value of production of each agricultural product. However, since 2012 China has provided domestic support of wheat, two varieties rice and corn well in excess of the 8.5 level. In 2015 the aggregate value of support China provided the growers of these commodities was nearly $100 billion in excess of China's permitted level of domestic support."

A 2014 study sponsored by US Wheat Associates, showed that China's minimum procurement price of about $10 per bushel for wheat, in addition to other subsidies, violates China's WTO commitments. That market price support is so high that the Chinese government has to purchase and store enormous stocks of domestic wheat.

As a result, USDA estimates that by June 2017, China will hold 44 percent of the world's wheat stocks, which will be at record levels and further depress market prices. This also hurts Chinese flour millers who are forced to purchase overpriced domestic wheat from these stocks and hurts their customers who pay more for the flour.