White House accuses China of illegally subsidizing crops by $100 bn per year

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Robert Williams | FlashRatings | Wednesday, September 14, 2016 2:02 PM EDT
The Obama administration has filed a complaint against China in the World Trade Organization claiming that the government is illegally subsidizing rice, corn, and wheat. 

The U.S. claims that China’s support for those crops—which includes fixing guaranteed minimum prices—incentivizes overproduction and makes it harder for American farmers to export to China. 

The policy to can also lead to government sell-offs of the eventual surpluses in these crops, which can push down market prices. 

“Unfairly distorted prices on important crops lead to overproduction in China and disadvantage American farmers who export these same crops around the world,” Obama said in a statement. 

The U.S. alleges that the support for rice, corn, and wheat surpassed the limits agreed to in China’s WTO membership agreement by more than $100 billion in 2015.  

Analysts were divided on whether the U.S. suit was good news for American farmers, with some anticipating a potential backlash by China. 

“The most likely impact in the next six months might be to motivate China to impose anti-dumping tariffs on U.S. products, including agricultural products,” William Tierney, chief economist for Chicago-based research and analysis firm AgResource Co. told Bloomberg. “It will have little or no impact on Chinese ag policies.”

The move is part of a broader effort by the White House to check Chinese trade practices it considers unfair and to influence Pacific trade more broadly, notably with the embattled Trans-Pacific Partnership (TPP) deal. 

“This is the 14th WTO case we’ve launched against China since I took office and the 23rd overall, and we’ve won every case that’s been decided,” Obama said. “But it’s not enough to enforce the existing rules; as our global economy evolves, we have to ensure America plays a leading role in setting the highest standards for the rest of the world to follow.” 

House Speaker Paul Ryan, a Wisconsin Republican, has assured GOP lawmakers that the TPP deal will not move forward during the lame-duck session.