Abstract
AbstractThis paper assesses key issues in the dispute over the United States’ claim that for certain grains China exceeded its limits on domestic support under the Agreement on Agriculture (AoA) during 2012–2015. The panel first determined that the base years for the reference price in calculating China's market price support were 1996–1998, rather than 1986–1988 as stipulated in the AoA, and that production in the geographic regions where the support programs operated, not the smaller quantities purchased at administered prices, constituted eligible production. The panel then found China had exceeded its limits in each of the four years for wheat, Indica rice, and Japonica rice. The possibility was left open that a government can determine eligible production by setting maximum purchases at support prices in its regulatory framework. China used this option to claim that its programs for 2020 implemented the recommendations and rulings of the DSB. We argue that use of outdated fixed external reference prices to measure the price gap and to define eligible production by limits on purchases, distance calculation under the AoA from economic support measurement. The measurement issues compound the discord among Members over levels of agricultural support.
Highlights
Neither party appealed the panel findings, and the DSB adopted the panel report on 26 April 2019.17 China and the United States agreed that 31 March 2020 would be the reasonable period of time for China to implement the recommendations and rulings of the DSB.18
The market price support (MPS) as a percent of value of production (%MPS) exceeded the limit for each crop in each year, rising over the four years and averaging 18.6% for wheat, 29.3% for Indica rice and 18.6% for Japonica rice
If Tariff Rate Quotas (TRQs) fill is below import demand at a given applied administered price (AAP), domestic prices can rise above required AAPs for Indica rice to be about 23.6% lower in 2012 to 29.0% lower in 2015 at the QEP determined by the panel
Summary
Discord over high levels of agricultural support and protection has confounded international economic relations for decades. The support program parameters subsequently announced by China for 2020 demonstrate that MPS for wheat and rice, when measured in line with the DSB recommendations and rulings, may be accommodated within China’s domestic support commitment while constraining economic support only modestly. This outcome is particular to the economic and policy circumstances of China’s price support programs and to its obligations as a non-original Member as determined by the panel. The MPS formula remains problematic overall in terms of achieving the AoA objective and purpose of “correcting and preventing restrictions and distortions in world agricultural markets”.4
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