The U.S. won a World Trade Organization (WTO) case today in which it had challenged China’s use of tariff-rate quotas (TRQs) for imported rice, wheat and corn limited market access for U.S. grain exports. The WTO ruled that under the terms of its WTO accession, China’s administration of TRQs as a whole violated its obligation to administer them on a “transparent, predictable and fair basis,” which ultimately denied U.S. farmers access to China’s market for grain.
“China’s grain TRQs have annually underfilled. USDA estimates that if China’s TRQs had been fully used, it would have imported as much as $3.5 billion worth of corn, wheat and rice in 2015 alone,” explains the Office of the U.S. Trade Representative.
But the U.S. did not win every element of its case. The dispute panel said the U.S. failed to show that China had violated its public notice obligation under the General Agreement on Tariffs and Trade in its use of TRQs. Either side can appeal the ruling for 60 days.
This comes soon after a February victory at the WTO where the U.S. had challenged the calculation methodology used in China’s price supports for wheat, Indica rice and Japonica rice, proving that China’s domestic price support was far too high. Both cases come against the backdrop of a trade war between the nations and efforts by the U.S. and China to reach a trade deal.
Impact: The WTO decisions should make China bring its domestic support programs for wheat and rice and their TRQ implementation into compliance with world trade rules. But the possibility to appeal means actual implementation of any changes will be delayed, which in turn pushes any benefits to U.S. producers farther down the road.
And, as is the case with other WTO disputes, China could decide not to make any changes and to instead offer the U.S. compensation.
Another possibility is that the issues could be addressed via a U.S./China agreement that negotiators are currently working to finalize.