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  October 2nd, 2015 | Written by

U.S., EU, Canada Ask China to Defend its Ag Support Policies

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  • The U.S., EU, and Canada have questioned whether several of China’s agricultural support programs violate WTO rules.
  • China said purpose of stockholding is to stabilize grain production, guarantee supply, and protect farmers’ livelihoods.
  • Under WTO mandates, subsidies must not distort trade, must be government-funded, and must not involve price support.

World Trade Organization members met recently in Geneva with its Committee on Agriculture—the WTO body that oversees agricultural trade issues—to review the agricultural trade policies of some of the world’s major traders.

One of the top issues covered at the meeting was China’s domestic agricultural support programs. The U.S., the European Union, and Canada questioned whether several of the programs violated WTO mandates.

In response to the questions from the U.S. and Canada on its market price support scheme, China said that the purpose of its temporary stockholding scheme is “to stabilize grain production, to guarantee supply at times of market fluctuations, and to protect farmers’ livelihood.”

The purchasing price, China said, “reflects market conditions, and there is a limit to the quantity of stockholding.”

The EU questioned China’s increased spending on public stockholding for food security purposes while China responded that “government purchases are made at prices reflecting market conditions, and therefore, the criteria for so-called ‘Green Box’ classification has been satisfied.”

In WTO terminology, subsidies in general are identified by boxes with the colors of traffic lights: green (permitted), amber (slow down, or be reduced), and red (forbidden).

In agriculture, things are, as usual, more complicated. The WTO’s umbrella Agriculture Agreement has no red box, although domestic support exceeding the reduction commitment levels in the amber box is prohibited. In addition, a blue box designates subsidies that are tied to programs that limit production.

According to WTO mandates, in order to qualify for green-box designation, “subsidies must not distort trade, or at most cause minimal distortion. They have to be government-funded (not by charging consumers higher prices) and must not involve price support.”

China was also asked by the U.S. and the EU to clarify the support it provides for the country’s domestic cotton sector.

Responding to questions about the support it provides its domestic cotton sector, China said that it “is intended to guarantee the livelihood of cotton farmers, who mostly live in impoverished border regions, and to contribute to regional stability.”

China said that its cotton support policies “do not affect imports, nor are they linked with the increase in world consumption of polyester.”