WTO finds China guilty of mismanaging its tariff-rate quotas for wheat, corn and rice

World Trade Organization ruled that China administered its tariff-rate quotas for wheat, corn and rice inconsistently with its WTO commitments. The WTO ruling follows one in February against China’s excessive support for domestic grain farmers.

The United States won a World Trade Organization (WTO) ruling against China’s use of tariff-rate quotas for rice, wheat and corn, which it successfully argued limited market access for U.S. grain exports. It came amid U.S.-China trade talks and on the heels of Washington clinching a WTO ruling on China’s price support for grains in March.

A WTO dispute panel ruled that under the terms of its 2001 WTO accession, China’s administration of the tariff rate quotas (TRQs) as a whole violated its obligation to administer them on a “transparent, predictable and fair basis”. TRQs are two-level tariffs, with a limited volume of imports allowed at the lower ‘in-quota’ tariff and subsequent imports charged an “out-of-quota” tariff, which is usually much higher.The administration of state trading enterprises and non-state enterprises’ portions of TRQs are inconsistent with WTO rules, the panel said. Australia, Brazil, India, and the European Union were among those reserving their rights in the dispute brought by the world’s largest grain exporter.

In a statement, U.S. Trade Representative Robert Lighthizer and Secretary of Agriculture Sonny Perdue welcomed the decision, saying China’s system “ultimately inhibits TRQs from filling, denying U.S. farmers access to China’s market for grain”. If China’s TRQs had been fully used, $3.5 billion worth of corn, wheat and rice would have been imported in 2015 alone, it said, citing U.S. Department of Agriculture estimates.

China’s Ministry of Commerce said in a statement it “regrets” the panel’s decision and that it would “earnestly evaluate” the panel’s report. China would “handle the matter appropriately in accordance with WTO dispute resolution procedures, actively safeguard the stability of the multilateral trading system and continue to administer the relevant agricultural import tariff quotas in compliance with WTO rules”, it said. Either side can appeal the ruling within 60 days.

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

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