WTO ruling

Wheat bound for overseas pours into the holds of a ship at the Port of Portland. A World Trade Organization panel has found that China is not living up to its promises to buy more overseas grain.

A World Trade Organization dispute settlement panel has found that China administered its tariff-rate quotas for wheat, corn and rice inconsistently with its WTO commitments.

As a result, the nation imported billions of dollars less of those commodities.

"Contrary to those commitments, China’s TRQ administration is not transparent, predictable, or fair, and it ultimately inhibits TRQs from filling, denying U.S. farmers access to China’s market for grain," the Office of the U.S. Trade Representative stated.

The WTO ruling follows one in February against China's excessive support for domestic grain farmers. The domestic price of wheat can be as much as $10 a bushel.

China’s grain TRQs have been underfilled each year, according to the USTR. USDA estimates that if China’s TRQs had been fully used, it would have imported as much as $3.5 billion in corn, wheat and rice in 2015 alone.

Millers in China must pay more to the government wheat sellers because domestic wheat is heavily subsidized, said Steve Mercer, vice president of communications for U.S. Wheat, told the Capital Press. That higher cost is passed on to processors and consumers.

If China opened its TRQ for imported wheat, which is less expensive than domestic wheat, costs for flour and food made from it would be lower.

The wheat Chinese farmers grow is not the quality and variety millers need to meet consumer demand, Mercer said.

The Chinese government can appeal the WTO's ruling. The appellate board would review and respond an appeal.

“With these decisions, we call on the Chinese government to come into compliance with the rules it accepted when it joined the WTO,” U.S. Wheat president Vince Peterson said in a joint press release with the National Association of Wheat Growers. “The world now sees that their policies stifle market-driven wheat trade, block export opportunities and force private sector buyers and consumers to pay more than they should for milling wheat and wheat-based foods.  We appreciate that the Trump Administration continues to shine a light on these distorting policies by supporting the WTO dispute cases.”

"NAWG applauds the Administration for pressing the WTO to enforce trade rules that ensure fair trade for U.S. wheat growers," NAWG CEO Chandler Goule said in the press release. "Further, we appreciate the work done by those members of Congress who continued to press on this issue ad move the process forward."

Will China comply?

"Have no idea," Mercer said.

China is buying spring wheat from Canada due to U.S. tariffs on Chinese imports, including wheat.

"Removing the tariffs would open up the market a bit," Mercer said. "Removing the tariffs and China complying with the TRQ has the potential to open that market even more for U.S. farmers."

If China met its 9.64 million-metric-ton wheat TRQ, its farmers would still produce 90% of domestically consumed wheat, according to U.S. Wheat.

Mercer believes demand for U.S. wheat would be more consistent. Private flour millers are "anxious" to get more to blend with the flour produced in China to meet growing demand for higher quality products, including hamburger buns, pizza dough and cakes.

In the meantime, U.S. Wheat is encouraged by the progress the two countries are making on a new trade agreement, Mercer said. U.S. negotiators  understand the challenges for wheat farmers, he said.

"We definitely see hopeful signs there," he said. "Our hope is that (the issues) are addressed in whatever agreement comes out of the negotiations."

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