New Chinese Farm Subsidy Data Shows Spending Increase

13 May 2015

Beijing has told WTO members that its trade-distorting farm subsidy payments increased to a record high of CN¥123 billion in 2010, equivalent to US$18 billion, according to new figures submitted to the global trade body.

The payments are all classed as “de minimis” farm support, which although seen as trade-distorting is permitted under WTO rules so long as it falls below a certain percentage of the value of production.

In China’s case, de minimis payments have to fall below 8.5 percent of the value of production – compared to ten percent for other developing countries, or five percent in developed countries. Product-specific payments are counted separately from non-product specific support.

At the same time, a sudden fall in “green box” payments classified as causing only minimal trade distortion at the WTO meant that this category of support was lower in 2010 than it had been at its peak two years earlier.

The government reported that green box payments fell to CN¥535 billion in 2010 (US$78 billion) – nearly CN¥60 billion lower than 2008 levels.

Rice, maize, and wheat

According to the government’s notification, rice, maize, and wheat topped the list of products benefitting from support.

Rice benefited from CN¥7.6 billion support, maize from CN¥6 billion, and wheat from CN¥5.8 billion.

Other important products such as cotton and pigmeat were also included as receiving government support, at CN¥3 billion and CN¥2 billion, respectively.

Other agricultural domestic support that was generally available to all products made up the lion’s share of those payments classified as trade-distorting. Beijing notified these as accounting for almost CN¥98 billion.

In recent years, China – along with other developing countries – has nonetheless questioned the extent to which the WTO’s existing methodology for calculating farm subsidies provides a sound basis for doing so.

The G-33 coalition of developing countries with significant populations of smallholder farmers has argued that they should benefit from additional flexibility in order to compensate for the impact of price inflation. (See Bridges Weekly, 14 November 2012)

Infrastructure spending falls

A significant fall in some categories of green box spending in 2009 and 2010 meant that total farm support levels in China were nonetheless lower than in 2008. (See Bridges Weekly, 19 October 2011)

The drop in farm support is particularly significant as China’s farm subsidy spending has otherwise tended to increase steadily across all categories year on year.

Infrastructure spending fell from CN¥125 billion in 2008 to CN¥96 billion in 2009, before rising to CN¥113 billion in 2010. It was the largest category of farm support notified in that year.

Payments fell even more steeply in another category, “other general services.” This includes operating expenses related to agriculture agency buildings, salaries, and staff pensions.

Outlays in this area dropped more than three-fold, from CN¥166 billion in 2008 to CN¥47 billion in 2010.

Spending on environmental programmes continued to rise, and accounted for around CN¥90 billion in both 2009 and 2010.

Doha Round controversy

The new data is likely to be welcomed by other WTO members, who have repeatedly complained that the governments of major trading powers have fallen behind in their regular reporting of farm subsidy data to the global trade body.

At the same time, the figures are likely to reignite controversy among farm trade negotiators over how best to craft future rules on agricultural domestic support spending.

The US has argued that large developing countries such as China and India ought to undertake steeper cuts in their farm subsidy spending than are currently foreseen in the most recent draft text for the WTO’s Doha Round negotiations. (See Bridges Weekly, 23 April 2015)

The countries concerned have objected to these demands, arguing instead that the draft deal that was negotiated in 2008 should still be the basis for any eventual agreement.

The chair of the WTO agriculture negotiations, New Zealand Ambassador John Adank, recently identified domestic support as a “threshold issue” that is likely to determine progress in other areas.

Trade officials are now expected to intensify further talks in the run-up to the July deadline for agreement on a work programme on the remaining Doha issues. (See Bridges Weekly, 7 May 2015)

ICTSD reporting.

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