The United States WTO Complaint on China’s Agricultural Domestic Support: Preliminary Observations
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This note provides some preliminary observations on the complaint initiated in September 2016 by the United States about China’s agricultural domestic support under the rules for dispute settlement of the World Trade Organization (WTO). The United States alleges that certain support for wheat, corn and rice exceeded China’s commitments under the Agreement on Agriculture in the years 2012-2015. The WTO established a Panel for this dispute on 25 January 2017. The note examines elements that may factor into a WTO Dispute Settlement Body ruling on this case, particularly the interpretation of “applied administered price” and “quantity of production eligible to receive the applied administered price”, key terms that determine market price support under the Agreement. China’s accession documents and annual support notifications, available only through 2010, report the eligible production as the quantities procured by state-authorized grain enterprises or less. The United States apparently is asserting that a larger production quantity, possibly total production, be counted and that China’s announced support prices are applied administered prices. The findings of a Panel or the Appellate Body on these definitional issues may involve the hierarchy between Agreement language that support be calculated “taking into account the constituent data and methodology” of a member and “in accordance with” the specific provisions of the Agreement. For rice, an issue is whether the administered price needs to be adjusted up from an unmilled to milled basis for comparability with the reference price of milled rice, which would increase calculated market price support. Since the United States has not made public its support calculations, the note estimates the market price support that might be calculated under the Agreement using total production. These estimates indicate support in excess of China’s limits on certain product-specific support, which is 8.5 percent of the value of production, for wheat and corn in all four years. Support for rice is excessive only if the administered price is adjusted to a milled basis. The excesses calculated under these assumptions sum to about USD 67 billion for 2015, a substantial amount compared to support within limits that would sum to about USD 19 billion. Market price support measured under the Agreement differs from economic measurements of market price support, such as by OECD. For 2012-2015, OECD measures economic market price support in China for wheat, corn and rice in the range of 14 to 39 percent of each product’s value of production. The coincidence of this situation with the possibility that China’s support under the Agreement exceeded its limits raises the prospect that, in this and possibly other cases, the WTO rules on domestic support may have an effect on reining in certain economic support. To meet its WTO commitments a country would in these circumstances need to limit the amount of economic support, or at least resort to different policy instruments than applied administered prices.