INSIGHTi
U.S. Challenges to China’s Farm Policies
Updated July 19, 2021
In 2019, the World Trade Organization (WTO) ruled in favor of the United States in two cases that the
U.S. Office of the Trade Representative (USTR) filed against China, al eging that China’s agricultural
policies were inconsistent with its WTO obligations. While China agreed to conform to the WTO rulings,
USTR contends that Beijing failed to act by the agreed-upon deadlines and has requested authorization to
retaliate by raising tariffs on certain imports from China. The choice of products to target would be up to
the U.S. government.
China’s Farm Support Spending
In the first case (DS511), USTR contended that China’s support policies for growers of wheat, rice, and
corn exceeded the support limit it agreed to in 2001, when it joined the WTO, by nearly $100 bil ion from
2012 through 2015. USTR asserted that these policies created an incentive for Chinese farmers to increase
production of the subsidized crops, displacing imports and distorting international trade.
On February 28, 2019, the WTO dispute settlement body agreed with major parts of the U.S. complaint,
finding that China had exceeded its domestic support limits for wheat and rice in each year between 2012
and 2015. The WTO body also disagreed with China’s methodology for calculating the amount of
domestic support its wheat and rice farmers received. It recommended changes to bring the Chinese
policies into compliance with China’s WTO commitments. It did not make a ruling on corn because,
following the 2015 harvest, China made changes to its calculations of corn support prices, making them
less market distorting. China did not appeal the ruling but committed to abide by it. China restated that
commitment in its Phase One trade agreement with the United States in January 2020.
On June 18, 2020, China notified the WTO that China had implemented changes to its rice and wheat
policies to comply with the WTO recommendations. China adopted an approach that the dispute
settlement body had indicated as potential y legal under the WTO’s Agreement on Agriculture. China is to
cap the annual quantity of wheat and rice eligible to receive government support at a level substantial y
less than total national production. Each year, in advance of planting, China is to announce both the
support prices and the maximum production amounts eligible for government procurement at those prices.
Any quantities produced beyond the announced level would not be eligible for government support and
would therefore not count against support limits.
Congressional Research Service
https://crsreports.congress.gov
IN11469
CRS INSIGHT
Prepared for Members and
Committees of Congress
link to page 2 
Congressional Research Service
2
In 2016 China reported that it had purchased 28.5 mil ion metric tons (MMT) of wheat, representing 6.6%
of the total value of national wheat production. Under the prior system, the dispute settlement body found
this to violate China’s WTO commitments because there was no cap on government procurement, and the
price support could have led to greater domestic production. This meant that China’s support limits
included the potential cost of supports for the entire rice and wheat crops.
Under the new system, the eligible quantity is announced in advance, so the policy can be perceived as
not encouraging production beyond that cap. With the flexibility to set these amounts annual y, China can
alter the quantity of subsidized commodities to remain within the WTO al owable limit of 8.5% of the
value of production, but purchase domestic rice and wheat at existing or higher levels than it previously
did. China’s new policy thus provides the government flexibility to determine the quantity of production
it would like to support, possibly influencing the amount of rice and wheat that the country imports. The
United States disagrees that China has complied with the WTO ruling and has requested authorization to
take countermeasures.
China’s Market Access Policy
On December 15, 2016, USTR filed a second WTO dispute settlement case (DS517) against China,
al eging that China’s administration of its tariff-rate quotas (TRQs) for wheat, rice, and corn were unclear
and had prohibited imports, thus undermining U.S. exports. A TRQ sets a low (or even zero) tariff on a
certain annual quantity of imports, while imports above the quota amount are levied a higher tariff rate.
When China joined the WTO in 2001, it agreed to create TRQs to al ow imports of wheat, rice, and corn,
setting in-quota tariffs for al three commodities at 1%, while the over-quota tariffs are set at 65%. As
China never imported these grains at the 1% tariff rate as its TRQs al ow, even when imported grains
were priced much lower than domestic grains, USTR al eged that China’s TRQ administration procedures
inhibited imports of these commodities. On April 18, 2019, the WTO ruled in favor of the United States,
recommending that China make changes to conform to its WTO obligations. In the U.S.-China Phase One
trade agreement, China agreed to comply with the WTO ruling.
Figure 1. China’s Tariff-Rate Quotas (TRQs) and Grain Imports
2016 versus 2020, in mil ion metric tons (MMT)
Source: China Customs Data, via Trade Data Monitor, accessed April 2021. TRQ volumes have not changed since 2004.
China’s imports of wheat and corn have grown significantly from the low levels of 2016, but its rice
imports in 2020 were 20% lower than in 2016, and barely half of the 5.4 MMT al owed under its TRQ at
a 1% tariff rate (Figure 1). On July 16, 2021, USTR requested WTO approval to retaliate, stating that
China failed to comply with its WTO obligations by June 29, 2021 as mutual y agreed. China objected to
U.S. statements and requested for the establishment of a WTO panel that would review its compliance.
Congressional Research Service
3
Author Information
Anita Regmi
Specialist in Agricultural Policy
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.
IN11469 · VERSION 10 · UPDATED