ShapeShapeauthorShapechevroncrossShapeShapeShapeGrouphamburgerhomeGroupmagnifyShapeShapeShaperssShape

WTO and US Chicken Exports: China Puts its Case

by 5m Editor
22 September 2011, at 11:35am

CHINA - The latest US move to challenge China at the World Trade Organization (WTO) is illogical, according to the Chinese authorities.

The United States announced on 20 September that it started action at the WTO by challenging Chinese duties on US poultry products that Beijing imposed last year, reports an official source in China.

The move is illogic. The United States does not check its policies on agricultural subsidies which lead to the dumping of poultry products in the Chinese market. Instead, it took action against China, where a number of poultry industries have fallen victims to the dumping.

Last September, China decided to levy anti-dumping duties of between 50.3 per cent to 105.4 per cent on imports of US chicken products for five years. The decision was based upon findings of an investigation by the Ministry of Commerce which show that the US chicken industry has dumped broiler products into the Chinese market and caused 'substantial damage' to China's domestic industry.

Statistics show that US exports of chicken products have risen sharply since 2006. In 2008, US exports of chicken products to China rose 12.34 per cent year-on-year to 584,300 tons, and in the first half of 2009, about 305,600 tons of US chicken products landed in China, up 6.54 per cent year-on-year, or 89.24 per cent of China's total chicken product imports.

US dumping of chicken products stems from low cost of feed, mostly corn, and the substantial low price of corn comes from US policies on crop subsidies. This is a simple and clear chain of consequences.

The US government provides diversified subsidies for farmers under its farm bills. According to a Canadian report, for every dollar US farmers earn, 62 cents comes from some forms of government subsidies, with total aid from all levels of government adding up to more than $180 billion in 2009. Among the subsidies, feed grains account for the biggest share of around 35 per cent.

In a closed economy, crop subsidies would cause no problem as agriculture is less competitive than other sectors such as industry and services, and subsidies serve to protect the farmers.

However, in a globalised world, huge agricultural subsidies by developed countries, more often than not, put developing countries including China at a great disadvantage by unfair competition.

Meanwhile, agricultural subsidy has been a stumbling block in trade negotiations. In 2006, talks at the Doha round of WTO trade negotiations stalled because the United States refused to cut subsidies to a level where other countries' non-subsidized exports would have been competitive.

Mark Malloch Brown, former head of the United Nations Development Program, said agricultural subsidies caused "extraordinary distortion of global trade", adding that Western countries spend $360 billion a year on protecting their agriculture with a network of subsidies and tariffs that costs developing countries about $50 billion in potential lost agricultural exports.

The US move is also politically motivated.

Last October, US senators Charles Grassley and Orrin Hatch sent a letter to top US trade and agriculture officials, urging the Obama administration to ask China to withdraw duties on US poultry they said were part of a larger pattern of unfair trade practices by Beijing.

As the presidential campaign is getting into high gear, the White House is increasingly pressured to play the 'China card'.

It is quite clear that China has strictly followed the WTO rules, and what it has done is common practice in world trade today.

For instance, in 2009, Brazil was authorised by the WTO to apply trade sanctions against the United States over the latter's illegal cotton subsidies for its cotton producers. Later, Brazil raised tariffs on 102 US products.

In short, it is the Unites States that started the unfair poultry trade and jeopardised the interest of Chinese poultry and other industries. In response, China was forced to take trade remedy measures to protect its vulnerable enterprises.

Therefore, the United States is strongly advised to examine the negative impact of its crop subsidies on China's poultry industry and look for a proper solution through consultations rather than seek confrontations and retaliations.

It is understandable that the US government has adopted the strategy of giving higher priority to exports when the US economy is in trouble. But if it resorts to trade protectionism or even trade war, Washington would surely suffer more losses rather than reap gains.

Further Reading

- Go to our previous news item on this story by clicking here.