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Steel, Aluminum Tariffs Raise the Risk of Retaliation Against U.S. Agriculture

ARLINGTON, Virginia — U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) are extremely disappointed in the decision announced today to impose sweeping tariffs on imports of steel and aluminum. We have repeatedly warned that the risks of retaliation and the precedent set by such a policy have serious potential consequences for agriculture. It is dismaying that the voices of farmers and many other industries were ignored in favor of an industry that is already among the most protected in the country.

If the United States is taken to dispute settlement at the World Trade Organization (WTO) for imposing these tariffs, we call on the U.S. Trade Representative (USTR) to avoid invoking the essential security exception under GATT Article XXI. The recent Department of Defense memorandum made it clear that imported steel and aluminum did not threaten its ability to acquire enough from domestic suppliers to meet its needs. The USTR should not take the extraordinary step of invoking Article XXI to defend what we believe is protectionism.

At NAWG’s board of directors meeting this week, a new resolution was passed urging the Administration to avoid imposing national security-based trade barriers on commonly traded products. NAWG’s newly instated President Jimmy Musick, a wheat farmer from Sentinel, Oklahoma, said “at such an economically hard time for wheat growers, we do not want to see trade barriers brought against us from some of our top customers who are impacted by this decision.”

Wheat farmers battling a market in which China holds almost 50 percent of world ending wheat stocks can sympathize with steel and aluminum workers on the economic effects of Chinese policies leading to global oversupply. However, we hope that our legitimate concerns with this action are heard and taken into consideration in this process.

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About U.S. Wheat Associates
USW is the export marketing organization for U.S. wheat farmers. Its mission is to “develop, maintain, and expand international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers.” USW activities around the world are made possible through producer checkoff dollars managed by 17 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

About NAWG
NAWG is the primary representative in Washington D.C. for wheat growers, working to ensure a better future for America’s growers, the industry and the general public. NAWG works with a team of 20 state wheat grower organizations to benefit the wheat industry at state and national levels. From their offices in the Wheat Growers Building on Capitol Hill, NAWG’s staff members are in constant contact with state association representatives, NAWG grower leaders, Members of Congress, Congressional staff members and the public.

Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S. – 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.

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USW Worries Steel Industry Demands Could Disrupt Trade and Threaten National Security

U.S. Wheat Associates (USW) sounds an alarm today in reaction to the Department of Commerce’s announcement that it has submitted to the White House the results of its Section 232 investigation of the national security implications of steel imports. Done at the prodding of a large segment of the U.S. steel industry, the investigation and its potential results likely ignore the disastrous implications for other U.S. sectors from extreme trade protections for commonly traded steel.

The World Trade Organization’s (WTO) national security exception from normal trade rules has traditionally been narrowly defined for truly exceptional products deemed necessary to maintain essential security interests. There is a good reason for this cautious approach, respected by virtually every country: common usage of it would undermine decades of carefully negotiated trade rules that foster peaceable global trade. These types of restrictions on a commonly traded product like steel blows that exception apart.

Global trade rules were pioneered by the United States after World War II precisely to avoid the types of protectionist trade policies that exacerbated tensions leading to the global conflict. Since national security exceptions are self-declared and unenforceable, the United States using that exception as a loophole could lead to a major breach in the system of global trade rules with unpredictable consequences.

Specifically, USW believes that there is no greater national security interest for a country than being able to feed its people, which is best achieved through open markets. If the United States restricts steel imports under a national security claim, some countries may use the same pretense to restrict imports of U.S. wheat and other agricultural products.

“While we don’t yet know the contents of Commerce’s recommendations to President Trump, if they’re anything like what the steel industry has proposed, we hope the President will do the right thing and reject it,” said USW President Vince Peterson. “Under the pretense of asking for fair trade, the steel industry is looking for sweeping protection, and that threatens to undermine the global trade rules that have helped keep our country secure and our farmers competitive.”

The steel industry supplied about two thirds of the domestic market in 2017 and has nearly 150 existing trade remedies in place against imported steel products. Section 232 is a different type of remedy that could allow unprecedented and sweeping trade restrictions that disregard carefully negotiated WTO rules. While it may target Chinese steel in part, China did not even break the top 10 sources of U.S. steel imports in 2017.

“The domestic steel industry already has more protection in place than any other industry so there is no reason to blow up trade rules to restrict imported steel,” said USW Chairman Mike Miller, a farmer from Ritzville, Wash. “As a farmer, I know that I always have to work hard to stay competitive; if steel companies can’t do that with dozens of trade remedies already in place, maybe they should look for solutions that address the real problems instead of just restricting trade.”

To view USW’s previous statement on the Section 232 investigation, click here.

USW’s mission is to “develop, maintain, and expand international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers.” USW activities in more than 100 countries are made possible through producer checkoff dollars managed by 17 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

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Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.

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Wheat Grower Organizations Welcome New Trade Enforcement Actions Challenging China Policies

WASHINGTON, DC — U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) welcome two trade dispute actions by the U.S. Trade Representative (USTR) challenging Chinese government policies that distort the wheat market and harm wheat growers throughout the rest of the world. USW and NAWG are encouraged to see the U.S. government take such a strong position on trade enforcement, which is crucial for building confidence in existing and new trade agreements.

The USTR filed a request on Dec. 15, 2016, for consultations with the World Trade Organization (WTO), alleging that China is not fairly administering its annual tariff rate quotas (TRQ) for corn, rice and 9.64 million metric tons (MMT) of imported wheat. This request states that China’s TRQ administration unfairly impedes wheat export opportunities. The USTR announced the TRQ action simultaneously with a request that the WTO form a dispute panel in the case it filed in September against China’s excessive market price support for domestic wheat, corn and rice production.

“As with its price support case, the USTR is shining a light on other policies that pre-empt market driven wheat trade, stifle our export opportunities and force private sector buyers and Chinese consumers to pay far more for milling wheat and wheat-based foods,” said USW President Alan Tracy.

“The facts in these two cases go hand-in-hand, demonstrating how Chinese government policies create an unfair advantage for domestic wheat production,” said Gordon Stoner, president of NAWG and a wheat farmer from Outlook, Montana. “Both actions call attention to the fact that when all countries follow the rules, a pro-trade agenda and trade agreements work for U.S. wheat farmers and their customers.”

China’s wheat TRQ was established in its WTO membership agreement in 2001. Under that agreement, China is allowed to initially allocate 90 percent of the TRQ to be imported through government buyers, or state trading enterprises (STEs), with only 10 percent reserved for private sector importers. The private sector portion of the TRQ is functioning well enough to be filled in recent years, in part because Chinese millers are trying to meet growing demand for products that require flour from different wheat classes with better milling and baking characteristics than domestically produced wheat provides. However, China’s notifications to the WTO on TRQ usage show an average fill rate of only 23 percent.

The WTO does not require that TRQs fill every year, but it has established rules regarding transparency and administration that are intended to facilitate the use of TRQs.

“When you consider that China’s domestic wheat prices are more than 40 percent higher than the landed cost of U.S. wheat imported from the Pacific Northwest, it would be logical to assume the TRQ would be fully used if the system were operating fairly, transparently and predictably as the rules intend. It is clearly not operating that way,” said Tracy. “This troublesome administration of China’s wheat TRQ is restraining export opportunities for U.S. wheat farmers and farmers from Canada, Australia and other wheat exporting countries to the detriment of Chinese consumers.”

The facts also argue against potential claims that enforcing the TRQ agreement would threaten China’s food security. China produces more wheat each year than any other single country and currently holds an estimated 45 percent of the world’s abundant wheat supplies. If China met its 9.64 MMT wheat TRQ, it would move up from number 14 to number 2 on the list of the world’s largest wheat importers, and its farmers would still produce 90 percent of domestically consumed wheat. Opening the wheat TRQ would also allow private sector millers and food producers to import the types of wheat they say they need, but cannot now obtain, and the benefits would be passed on to China’s consumers.

USW and NAWG also applaud the USTR’s request for a dispute panel in its WTO challenge to China’s trade-distorting market price support programs for wheat, corn and rice. It is a crucial step toward reining in a policy that costs U.S. wheat farmers between $650 and $700 million annually in lost income by pre-empting export opportunities and suppressing global prices, according to a 2016 Iowa State University study sponsored by USW.

USW’s mission is to “develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities in more than 100 countries are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA/Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

NAWG is a federation of 22 state wheat grower associations that works to represent the needs and interests of wheat producers before Congress and federal agencies. Based in Washington, DC, NAWG is grower-governed and grower-funded, and works in areas as diverse as federal farm policy, trade, environmental regulation, agricultural research and sustainability.

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Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.

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Wheat Growers Welcome Trade Enforcement Action on Chinese Market Support Programs

ARLINGTON, Virginia — U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) welcome the Obama Administration’s new trade enforcement action against China at the World Trade Organization (WTO). The significant investigative effort by the Office of the U.S. Trade Representative (USTR) and the U.S. Department of Agriculture (USDA) followed five years of work by USW, NAWG and other industry partners to demonstrate how China’s domestic support policies hurt U.S. farmers.

This enforcement action challenges the level of China’s trade-distorting market price support programs for wheat as well as for corn and rice. In describing its action, USTR said “the level of support provided through these programs in excess of China’s commitment was nearly $100 billion.”

These programs cost U.S. wheat farmers between $650 and $700 million annually in lost income by pre-empting export opportunity and suppressing global prices, according to a 2016 Iowa State University study sponsored by USW. That loss estimate is actually 19 percent more than the losses estimated by a similar 2015 study due to the effect of increasing global stocks and resulting market price decline.

“Wheat production subsidies in China and other advanced developing countries are the single biggest policy issue affecting our farm gate prices and global trade flows,” said USW President Alan Tracy. “In taking this step, USTR and USDA are demonstrating that trade enforcement can ensure that our many trade agreements and a pro-trade agenda really work for American farmers.”

“This enforcement action shows a welcome willingness to defend farmers against governments that blatantly disregard the rules of the road under their trade agreements,” said NAWG President Gordon Stoner, a wheat grower from Outlook, MT. “It comes at a critical time for farmers who have seen market prices collapse to unsustainable levels in recent years.”

A 2014 study by DTB Associates, also sponsored by USW, showed that China’s minimum procurement price of about $10 per bushel for wheat, in addition to other subsidies, violates China’s WTO commitments. That market price support is so high that the Chinese government has to purchase and store enormous stocks of domestic wheat. As a result, USDA estimates that by June 2017, China will hold 44 percent of the world’s wheat stocks, which will be at record levels and further depress market prices. This also hurts Chinese flour millers who are forced to purchase overpriced domestic wheat from these stocks and hurts their customers who pay more for the flour.

Noted Iowa State University agricultural economist Dr. Dermot Hayes conducted the 2015 and 2016 studies of domestic support effects. In reviewing the 2016 study results, which compared a base case including China’s current support to a new scenario in which the factors represented by China’s policies were removed, Dr. Hayes said farmers there would grow less wheat because domestic prices would fall and input costs would increase.

“In our comparison, that would benefit farmers in the United States and other wheat exporting countries as China would need to increase its imports to more than 9 million metric tons,” Dr. Hayes said. “The corresponding lift in wheat exports would increase U.S. farm income from wheat by 19 cents per bushel.”

“China may try to cloak its market price support as necessary to achieve self-sufficiency in wheat production, but this does not justify ignoring its trade commitments,” said Tracy. “Trade plays a vital role in food security, as no country can truly be self-sufficient in food production. The studies we have sponsored clearly show that eliminating its expensive market price support programs and letting the market work to meet their wheat needs would reduce the cost of food for Chinese consumers.”

“Trade agreements cannot meet their promise if other countries ignore the rules, no matter if the agreements are multilateral, bilateral or regional like the Trans-Pacific Partnership,” said Stoner. “That TPP has improved enforcement mechanisms is one more reason we strongly support its passage. Our grower organizations fully support this new trade enforcement action with China, and we will continue to work with our government and industry partners to address other trade distorting issues.”
USW and NAWG have posted the Iowa State studies online at https://bit.ly/1XPLrLo and https://www.wheatworld.org/issues/trade/. For results of two DTB Associates studies measuring domestic support in advanced developing countries, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf. For a third party analysis of individual policy measures by country, visit https://www.oecd.org/tad/agricultural-policies/producerandconsumersupportestimatesdatabase.htm#country.

USW’s mission is to “develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities in more than 100 countries are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA/Foreign Agricultural Service. USW maintains 17 offices strategically located around the world to help wheat buyers, millers, bakers, wheat food processors and government officials understand the quality, value and reliability of all six classes of U.S. wheat. For more information, visit our website at www.uswheat.org.

NAWG is a federation of 22 state wheat grower associations that works to represent the needs and interests of wheat producers before Congress and federal agencies. Based in Washington, DC, NAWG is grower-governed and grower-funded, and works in areas as diverse as federal farm policy, trade, environmental regulation, agricultural research and sustainability.

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Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.

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China’s Excessive Wheat Subsidies and Other Policies Increase U.S. Farm Losses

ARLINGTON, Virginia — Over the past few years, U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) have demonstrated how the policies of a few advanced developing countries are distorting world wheat trade and hurting farmers in the United States and other wheat exporting countries. In 2015, an Iowa State University study sponsored by USW showed that China’s excessive wheat subsidies alone were costing U.S. farmers almost $550 million per year. Now, just one year later, a January 2016 update of the study demonstrated that the decline in world prices has increased the projected annual loss in U.S. wheat farm revenue from China’s policies by 16 percent to $653 million.

A 2014 study by DTB Associates showed that China effectively pays its farmers a minimum procurement price of more than $10 per bushel for wheat and subsidizes input costs. In wheat alone, China provides an aggregate measure of support (AMS) of at least $15.4 billion or 36 percent of the value of production, which far exceed the 8.5 percent de minimis limit set when it joined the World Trade Organization (WTO). China also agreed to allow wheat imports at a 1 percent tariff rate, up to a quota of 9.64 million metric tons. The out-of-quota tariff rate is 65 percent. China rarely administers this tariff rate quota (TRQ) as agreed and imports invariably fall far below the quota, even when its domestic prices are far above world market prices.

The evidence strongly supports the conclusion that China’s noncompliant domestic subsidies and TRQ administration create artificial incentives for its farmers to grow even more wheat at a time when China already controls almost 40 percent of world wheat stocks. In turn, the policies suppress wheat import demand in China and put additional downward pressure on world wheat prices.

“Considering all the trade distorting policies U.S. farmers face in the world, the wheat subsidies in China and in other developing countries have the most serious effect on farm gate prices and trade flows,” said USW President Alan Tracy. “The studies we have sponsored clearly show the problem is growing more serious at the worst time for farmers who are already facing unprofitable prices.”

“We have seen prices collapse to unsustainable levels in just a few seasons, partially as a result of some of our trading partners not playing by the rules” said NAWG President Gordon Stoner, a wheat grower from Outlook, MT. “The decline in income of every wheat farmer in the United States will accelerate if China’s policies are not brought back into compliance with the commitments China’s government made to its trading partners.”

Noted Iowa State University agricultural economist Dr. Dermot Hayes conducted the 2015 study and the latest update. He said the results confirm that removing China’s domestic wheat support would have significant benefits for farmers in wheat exporting countries. The study used a proven econometric method to determine a world wheat “base case” including China’s current wheat input subsidies and price support. Researchers then removed the factors represented by China’s policies, ran the model again and compared the resulting scenario to the base case. Dr. Hayes said the results showed Chinese farmers over time would grow less wheat because domestic prices would fall and input costs would increase.

“In our comparison, China would need to increase its imports to more than 9.6 million metric tons per year, a volume that is about equal to the Chinese wheat tariff rate quota” said Dr. Hayes. “That would increase wheat exports and farm revenue in the United States, as well as in Europe, Canada and Australia (see Table 1). In the United States specifically, farm income from wheat would increase by $0.19 per bushel compared to the base scenario (see Table 2).”

“NAWG supports free trade and supports Congressional ratification of TPP,” said Stoner. “But trade agreements cannot meet their promise if other countries ignore the rules. It is time for the Administration to seek enforcement through the WTO.”

“Since these harmful policies are the acts of sovereign governments, our farmer organizations cannot battle them alone,” said Tracy. “At the direction of the USW and NAWG boards, we are working with the Office of the U.S. Trade Representative and USDA to develop a possible WTO challenge.”

USW and NAWG have posted the current update of the 2015 Iowa State study and the original study online at https://bit.ly/1XPLrLo and https://www.wheatworld.org/issues/trade/. For results of two DTB Associates studies measuring domestic support in advanced developing countries, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf. For a third party analysis of individual policy measures by country, visit https://www.oecd.org/tad/agricultural-policies/producerandconsumersupportestimatesdatabase.htm#country.

USW’s mission is to “develop, maintain, and expand international markets to enhance the profitability of U.S. wheat producers and their customers.” USW activities in more than 100 countries are made possible through producer checkoff dollars managed by 18 state wheat commissions and cost-share funding provided by USDA/Foreign Agricultural Service. USW maintains 17 offices strategically located around the world to help wheat buyers, millers, bakers, wheat food processors and government officials understand the quality, value and reliability of all six classes of U.S. wheat. For more information, visit our website at www.uswheat.org.

NAWG is a federation of 22 state wheat grower associations that works to represent the needs and interests of wheat producers before Congress and federal agencies. Based in Washington, DC, NAWG is grower-governed and grower-funded, and works in areas as diverse as federal farm policy, trade, environmental regulation, agricultural research and sustainability.

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Excessive Foreign Farm Support Disrupts World Wheat Trade, Hurts Farm Revenue

U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) unveiled the results of an econometric study showing that excessive farm support in several advanced developing countries could cost U.S. wheat farmers nearly $1 billion in revenue every year. USW recently showed that the governments of China, India, Turkey and Brazil have dramatically increased subsidies for domestic wheat production over the past ten years to levels that far exceed their World Trade Organization (WTO) agreements. This study confirms that these policies have a detrimental effect on U.S. and world wheat farmers and global wheat trade.

“I believe we have shown through these studies that the old perceptions about farm support and trade are clearly wrong,” said USW President Alan Tracy. “Today, it is the farm subsidies in a few advanced developing countries, not developed country policies, which disrupt normal trade flows and distort world wheat prices. These rapidly growing subsidies cause direct, serious and now measurable impacts on the prices that U.S. farmers receive for their grain.”

Noted agricultural economist Dr. Dermot Hayes and two of his colleagues at Iowa State University conducted the study. The goal was to determine what would happen to U.S. and global wheat production, trade and prices if domestic support in China, India, Turkey and Brazil were removed. To accomplish this, Dr. Hayes and his colleagues applied the price support and input subsidy data identified in a November 2014 study by DTB Associates to the respected CARD-FAPRI econometric model. Results showed that if all support were removed from all four countries, annual U.S. wheat production would increase by more than 53 million bushels, farm gate prices would increase by nearly $0.30 per bushel and U.S. wheat farmers would receive $947 million more in annual revenue (See Chart 1).

“The results confirm that if domestic support were removed wheat prices in the countries modeled would go down and farmers would plant less wheat, but domestic consumption would go up,” Hayes said. “The lower supply would lead to higher global wheat prices, which tend to benefit wheat exporting countries including the United States.”

The study also indicated that with such changes, wheat trade flows would shift and the four countries would increase net imports by nearly 10 million metric tons (MMT). Hayes said the model estimated the United States would capture more than 20 percent of such an increase to export an additional 2.2 MMT compared to the model’s baseline if there were no changes in domestic support in those countries.

Hayes’ team also used the model to predict the net effect that eliminating support in individual countries would have (See Table 1). Those results indicated that domestic support for Chinese wheat production alone has the largest individual effect. If support there ended, Chinese imports would grow from nearly 2 MMT per year to more than 7.5 MMT per year. This would still be less than the 9 MMT annual tariff rate quota that China agreed to in its WTO accession commitments. Hayes said the model showed that even with the predicted changes, China, India, and Turkey would continue to be at least 90 percent self-sufficient in wheat production. Eliminating domestic support would have the least effect in Brazil where support levels are lower than the other countries.

Shifting the Narrative

Hayes also noted that this study compares future scenarios to data from a market situation in which wheat cash prices were significantly higher than they are now. For example, in addition to Chinese government input subsidies coupled to wheat production, the DTB Associates study in 2014 showed Chinese farmers have government minimum support prices of more than $10.00 per bushel.

“Wheat prices have plummeted more than 30 percent since last year, a significant portion of which is due to these countries’ market distorting policies, which send the wrong signals to their farmers. This hurts American family farms like mine even more,” said Brett Blankenship, who grows soft white wheat near Washtucna, Wash., and is the current President of the National Association of Wheat Growers (NAWG).

Referring to current negotiations in the Doha round, Blankenship added, “It is totally unacceptable to tolerate demands from countries who are in violation of their WTO commitments, who continue with these huge levels of support while demanding concessions from the United States. The American wheat farmer will not give away any more.”

WTO records show that the United States has consistently met its commitments, never exceeding its Aggregate Measure of Support (AMS) limit of $19.1 billion. But other country’s proposals made as part of the Doha round would require the United States to drastically cut its limit, while members with growing programs would not be expected to make meaningful contributions. Deputy U.S. Trade Representative Amb. Michael Punke has called this a “mind-boggling imbalance” that firmly underpins the U.S. position that it is critical to put facts on the table for a frank discussion about the real dynamic of world agricultural production and trade.

The new study indicated that wheat farmers outside of the four countries analyzed would benefit by reducing domestic supports. Hayes said the model showed global wheat cash prices would increase by more than four percent and world net trade would increase by five percent if domestic support is removed in all four countries. The study suggested that there would be benefits even from partial changes in price supports and input subsidies, although Hayes said the magnitude of the cash price and trade increase would depend on the size of the removal in each country.

“Since these subsidies are the acts of sovereign governments, our farmers cannot battle them alone. We are working with USTR and USDA to determine our next steps, including a possible WTO challenge,” Tracy concluded.

USW and NAWG have posted the entire report online at www.uswheat.org/policy and https://www.wheatworld.org/issues/trade/. Results of the two DTB Associates studies measuring domestic support in advanced developing countries, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf. For a third party analysis of individual policy measures by country, visit https://www.oecd.org/tad/agricultural-policies/producerandconsumersupportestimatesdatabase.htm#country.

USW is the wheat industry’s export market development organization working to promote all six classes of U.S. wheat in more than 100 countries. Its activities are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

NAWG is a federation of 22 state wheat grower associations that works to represent the needs and interests of wheat producers before Congress and federal agencies. Based in Washington, D.C., NAWG is grower-governed and grower-funded, and works in areas as diverse as federal farm policy, trade, environmental regulation, agricultural research and sustainability.

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Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.

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New Study on Abuse of WTO Agricultural Rules Could Help Focus Doha Round Negotiations

ARLINGTON, Virginia — Several influential countries are not complying with the domestic agricultural support commitments they made as members of the World Trade Organization (WTO). That is the conclusion of a study sponsored by U.S. commodity organizations and introduced to agricultural negotiators Wednesday, Feb. 18, 2015, in Geneva, Switzerland. Those organizations made the point that recognizing the current realities in agricultural support and trade could help improve the chances of finally reaching a Doha Round agreement.

The study was conducted by DTB Associates, Washington, DC, and updates a similar study conducted in 2011. U.S. Wheat Associates (USW) was one of the sponsors of the latest study indicating that the governments of India, China, Turkey, Brazil and Thailand have dramatically increased trade distorting subsidies for wheat, corn or rice production over the past ten years to levels that exceed their WTO agreements — in most cases by large margins. That information has not been readily available to WTO negotiators.

“U.S. wheat farmers strongly support the goals of the WTO and the Doha Round,” said USW President Alan Tracy. “We also believe every WTO member must follow the rules. Sadly, the facts we have uncovered show this is not the case.”

Member countries are required to report their domestic support levels to WTO regularly, but more than 650 notifications were late as of November 2014, Tracy noted. Turkey has not reported its support since its 2001 crop year. China has not reported since 2008 and India just submitted a notification last fall covering seven crop years to make them current through 2010. However, the study demonstrates that even notifications that have been reported often rely on faulty methodology.

“This study shines a light on what is really happening,” said USW Vice President of Policy Shannon Schlecht. “What it shows is a massive increase in government-sanctioned support prices and violations of Aggregate Measure of Support agreements that are distorting world trade in wheat, corn and rice.”

The dramatic increases in current support price levels by country and commodity in the study are clear and most revealing when compared with reference prices in the United States (see “Support Price Levels).

*Reference Price, Agricultural Act of 2014
**Support price under the Paddy Pledging Scheme
Note: China and Brazil wheat reflect 2014/15 support price levels

The minimum government prices reported in the study indicated a significant increase in support for wheat production in these countries over the past several years. Since the original study in 2011, a few countries increased their minimum support price for wheat by $50 to $100 per metric ton.

Under the Uruguay Round Agreement of the mid 1990s, WTO member countries agreed to abide by limits on Aggregate Measure of Support (AMS). The DTB study showed India, China, Turkey and Thailand have exceeded their AMS commitments by a wide margin (See “Aggregate Measure of Support”). WTO records show that the United States has always met its annual notification commitment and has never exceeded its AMS limit of $19.1 billion.

Aggregate Measure of Support (AMS)
2013/14 and 2014/15
Billion U.S. Dollars
Country Wheat Corn Rice Other Total AMS Limit
China $15.5 – $18.4 $20.6 – $54.4 $12.4 – $37.0 NA $48.4 – $109.8 $0
India $12.4 – $15.8 $2.5 – $3.8 $13.3 – $28.2 $33.0 $36.1 – 93.4 $0
Brazil $0.8 01 $0.6 NA $1.4 $0.912
Turkey $5.7 $1.0 $0.3 NA $7.0 $0
Thailand NA $0.5 $1.4 – 10.1 NA $1.9 – $10.6 $0.634
1 Support below de minimis level

The fact that these countries have far exceeded their WTO support commitments leads to serious trade distortions. An insightful example may be found in the Indian government’s wheat production and trade policies.

The study determined that India’s minimum support price for wheat increased by 111 percent between 2005/06 and 2013/14. India recently notified the WTO of a much lower increase but the study showed that the Indian government used faulty tactics to calculate the number it reported, a number that many other WTO members have questioned.

Increasing support levels gave Indian farmers an artificial incentive to produce more wheat. In fact, India’s wheat production increased by 35 percent over those seven years to record levels. That buoyed world wheat supplies and increased pressure on prices that hurt wheat farmers in other countries.

Over the same time, Indian wheat exports increased from 300,000 metric tons (MT) to 6.5 million MT. The study also included evidence that India is offering wheat export subsidies that are also illegal under its WTO commitment. Yet, claiming it must maintain a large public stockpile of grain to maintain food security as an advanced developing country, India has demanded exemptions to its trade-distorting levels of support.

“We agree with our U.S. agricultural negotiators that we see no possibility of concluding the Doha agreement by pursuing the same approach used over the last decade,” Schlecht said. “Hopefully the facts in the study will help raise awareness of the current realities of trade-distorting farm subsidies. Without this information it will be impossible for WTO members to achieve a balanced Doha Round conclusion across the domestic support, market access and export competition pillars.”

For more information, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf.

USW is the wheat industry’s export market development organization working to promote all six classes of U.S. wheat in more than 100 countries. Its activities are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

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