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ARLINGTON, Virginia – An on-going series of policies that disrupts global demand for U.S. wheat and does not comply with World Trade Organization (WTO) rules should disqualify Turkey for eligibility under the Generalized System of Preferences (GSP) program. U.S. Wheat Associates (USW) testified to that effect at a hearing Sept. 26, 2018, held by the Office of the U.S. Trade Representative (USTR).

 

The GSP program provides preferential access to the U.S. market for developing countries that meet program standards. In 2017, Turkey exported $1.7 billion in goods to the United States under GSP, making it is one of the program’s largest beneficiaries. However, the law authorizing GSP requires beneficiary countries to refrain from engaging in unreasonable export practices. U.S. Wheat Associates believes that Turkey’s inward processing system for wheat and flour functions as an unreasonable export practice.

 

“Farmers have been complaining about Turkish flour for the better part of a decade due to the displacement of U.S. wheat in critical markets,” said USW Vice President of Policy Ben Conner, who represented USW at the hearing. “The fundamental problems are Turkey’s excessive domestic support and high tariffs combined with an inward processing regime that does not meet World Trade Organization standards.”

 

Turkey is the world’s largest flour exporter and in 2017 was the ninth largest exporter of wheat and wheat equivalents. Turkish flour not only displaces U.S. wheat in overseas markets but also harms U.S. wheat customers in local flour milling industries. One of USW’s top policy priorities is to see Turkey bring its wheat policy regime in line with its WTO commitments.

 

To read the full USW submission to USTR, click here.

 

USW’s mission is to develop, maintain, and expand international markets to enhance wheat’s profitability for U.S. wheat producers and its value for their customers in more than 100 countries. Its activities are made possible through producer checkoff dollars managed by 17 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

 

 

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Nondiscrimination and Alternate Means of Communications
In all its programs, activities and employment, U.S. Wheat Associates (USW) prohibits discrimination on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact USW at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S., 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, USW, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. USW is an equal opportunity provider and employer.

 

U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) unveiled the results of an econometric study showing that excessive farm support in several advanced developing countries could cost U.S. wheat farmers nearly $1 billion in revenue every year. USW recently showed that the governments of China, India, Turkey and Brazil have dramatically increased subsidies for domestic wheat production over the past ten years to levels that far exceed their World Trade Organization (WTO) agreements. This study confirms that these policies have a detrimental effect on U.S. and world wheat farmers and global wheat trade.

“I believe we have shown through these studies that the old perceptions about farm support and trade are clearly wrong,” said USW President Alan Tracy. “Today, it is the farm subsidies in a few advanced developing countries, not developed country policies, which disrupt normal trade flows and distort world wheat prices. These rapidly growing subsidies cause direct, serious and now measurable impacts on the prices that U.S. farmers receive for their grain.”

Noted agricultural economist Dr. Dermot Hayes and two of his colleagues at Iowa State University conducted the study. The goal was to determine what would happen to U.S. and global wheat production, trade and prices if domestic support in China, India, Turkey and Brazil were removed. To accomplish this, Dr. Hayes and his colleagues applied the price support and input subsidy data identified in a November 2014 study by DTB Associates to the respected CARD-FAPRI econometric model. Results showed that if all support were removed from all four countries, annual U.S. wheat production would increase by more than 53 million bushels, farm gate prices would increase by nearly $0.30 per bushel and U.S. wheat farmers would receive $947 million more in annual revenue (See Chart 1).

“The results confirm that if domestic support were removed wheat prices in the countries modeled would go down and farmers would plant less wheat, but domestic consumption would go up,” Hayes said. “The lower supply would lead to higher global wheat prices, which tend to benefit wheat exporting countries including the United States.”

The study also indicated that with such changes, wheat trade flows would shift and the four countries would increase net imports by nearly 10 million metric tons (MMT). Hayes said the model estimated the United States would capture more than 20 percent of such an increase to export an additional 2.2 MMT compared to the model’s baseline if there were no changes in domestic support in those countries.

Hayes’ team also used the model to predict the net effect that eliminating support in individual countries would have (See Table 1). Those results indicated that domestic support for Chinese wheat production alone has the largest individual effect. If support there ended, Chinese imports would grow from nearly 2 MMT per year to more than 7.5 MMT per year. This would still be less than the 9 MMT annual tariff rate quota that China agreed to in its WTO accession commitments. Hayes said the model showed that even with the predicted changes, China, India, and Turkey would continue to be at least 90 percent self-sufficient in wheat production. Eliminating domestic support would have the least effect in Brazil where support levels are lower than the other countries.

Shifting the Narrative

Hayes also noted that this study compares future scenarios to data from a market situation in which wheat cash prices were significantly higher than they are now. For example, in addition to Chinese government input subsidies coupled to wheat production, the DTB Associates study in 2014 showed Chinese farmers have government minimum support prices of more than $10.00 per bushel.

“Wheat prices have plummeted more than 30 percent since last year, a significant portion of which is due to these countries’ market distorting policies, which send the wrong signals to their farmers. This hurts American family farms like mine even more,” said Brett Blankenship, who grows soft white wheat near Washtucna, Wash., and is the current President of the National Association of Wheat Growers (NAWG).

Referring to current negotiations in the Doha round, Blankenship added, “It is totally unacceptable to tolerate demands from countries who are in violation of their WTO commitments, who continue with these huge levels of support while demanding concessions from the United States. The American wheat farmer will not give away any more.”

WTO records show that the United States has consistently met its commitments, never exceeding its Aggregate Measure of Support (AMS) limit of $19.1 billion. But other country’s proposals made as part of the Doha round would require the United States to drastically cut its limit, while members with growing programs would not be expected to make meaningful contributions. Deputy U.S. Trade Representative Amb. Michael Punke has called this a “mind-boggling imbalance” that firmly underpins the U.S. position that it is critical to put facts on the table for a frank discussion about the real dynamic of world agricultural production and trade.

The new study indicated that wheat farmers outside of the four countries analyzed would benefit by reducing domestic supports. Hayes said the model showed global wheat cash prices would increase by more than four percent and world net trade would increase by five percent if domestic support is removed in all four countries. The study suggested that there would be benefits even from partial changes in price supports and input subsidies, although Hayes said the magnitude of the cash price and trade increase would depend on the size of the removal in each country.

“Since these subsidies are the acts of sovereign governments, our farmers cannot battle them alone. We are working with USTR and USDA to determine our next steps, including a possible WTO challenge,” Tracy concluded.

USW and NAWG have posted the entire report online at www.uswheat.org/policy and https://www.wheatworld.org/issues/trade/. Results of the two DTB Associates studies measuring domestic support in advanced developing countries, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf. For a third party analysis of individual policy measures by country, visit https://www.oecd.org/tad/agricultural-policies/producerandconsumersupportestimatesdatabase.htm#country.

USW is the wheat industry’s export market development organization working to promote all six classes of U.S. wheat in more than 100 countries. Its activities are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

NAWG is a federation of 22 state wheat grower associations that works to represent the needs and interests of wheat producers before Congress and federal agencies. Based in Washington, D.C., NAWG is grower-governed and grower-funded, and works in areas as diverse as federal farm policy, trade, environmental regulation, agricultural research and sustainability.

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Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.

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ARLINGTON, Virginia — Several influential countries are not complying with the domestic agricultural support commitments they made as members of the World Trade Organization (WTO). That is the conclusion of a study sponsored by U.S. commodity organizations and introduced to agricultural negotiators Wednesday, Feb. 18, 2015, in Geneva, Switzerland. Those organizations made the point that recognizing the current realities in agricultural support and trade could help improve the chances of finally reaching a Doha Round agreement.

The study was conducted by DTB Associates, Washington, DC, and updates a similar study conducted in 2011. U.S. Wheat Associates (USW) was one of the sponsors of the latest study indicating that the governments of India, China, Turkey, Brazil and Thailand have dramatically increased trade distorting subsidies for wheat, corn or rice production over the past ten years to levels that exceed their WTO agreements — in most cases by large margins. That information has not been readily available to WTO negotiators.

“U.S. wheat farmers strongly support the goals of the WTO and the Doha Round,” said USW President Alan Tracy. “We also believe every WTO member must follow the rules. Sadly, the facts we have uncovered show this is not the case.”

Member countries are required to report their domestic support levels to WTO regularly, but more than 650 notifications were late as of November 2014, Tracy noted. Turkey has not reported its support since its 2001 crop year. China has not reported since 2008 and India just submitted a notification last fall covering seven crop years to make them current through 2010. However, the study demonstrates that even notifications that have been reported often rely on faulty methodology.

“This study shines a light on what is really happening,” said USW Vice President of Policy Shannon Schlecht. “What it shows is a massive increase in government-sanctioned support prices and violations of Aggregate Measure of Support agreements that are distorting world trade in wheat, corn and rice.”

The dramatic increases in current support price levels by country and commodity in the study are clear and most revealing when compared with reference prices in the United States (see “Support Price Levels).

*Reference Price, Agricultural Act of 2014
**Support price under the Paddy Pledging Scheme
Note: China and Brazil wheat reflect 2014/15 support price levels

The minimum government prices reported in the study indicated a significant increase in support for wheat production in these countries over the past several years. Since the original study in 2011, a few countries increased their minimum support price for wheat by $50 to $100 per metric ton.

Under the Uruguay Round Agreement of the mid 1990s, WTO member countries agreed to abide by limits on Aggregate Measure of Support (AMS). The DTB study showed India, China, Turkey and Thailand have exceeded their AMS commitments by a wide margin (See “Aggregate Measure of Support”). WTO records show that the United States has always met its annual notification commitment and has never exceeded its AMS limit of $19.1 billion.

Aggregate Measure of Support (AMS)
2013/14 and 2014/15
Billion U.S. Dollars
Country Wheat Corn Rice Other Total AMS Limit
China $15.5 – $18.4 $20.6 – $54.4 $12.4 – $37.0 NA $48.4 – $109.8 $0
India $12.4 – $15.8 $2.5 – $3.8 $13.3 – $28.2 $33.0 $36.1 – 93.4 $0
Brazil $0.8 01 $0.6 NA $1.4 $0.912
Turkey $5.7 $1.0 $0.3 NA $7.0 $0
Thailand NA $0.5 $1.4 – 10.1 NA $1.9 – $10.6 $0.634
1 Support below de minimis level

The fact that these countries have far exceeded their WTO support commitments leads to serious trade distortions. An insightful example may be found in the Indian government’s wheat production and trade policies.

The study determined that India’s minimum support price for wheat increased by 111 percent between 2005/06 and 2013/14. India recently notified the WTO of a much lower increase but the study showed that the Indian government used faulty tactics to calculate the number it reported, a number that many other WTO members have questioned.

Increasing support levels gave Indian farmers an artificial incentive to produce more wheat. In fact, India’s wheat production increased by 35 percent over those seven years to record levels. That buoyed world wheat supplies and increased pressure on prices that hurt wheat farmers in other countries.

Over the same time, Indian wheat exports increased from 300,000 metric tons (MT) to 6.5 million MT. The study also included evidence that India is offering wheat export subsidies that are also illegal under its WTO commitment. Yet, claiming it must maintain a large public stockpile of grain to maintain food security as an advanced developing country, India has demanded exemptions to its trade-distorting levels of support.

“We agree with our U.S. agricultural negotiators that we see no possibility of concluding the Doha agreement by pursuing the same approach used over the last decade,” Schlecht said. “Hopefully the facts in the study will help raise awareness of the current realities of trade-distorting farm subsidies. Without this information it will be impossible for WTO members to achieve a balanced Doha Round conclusion across the domestic support, market access and export competition pillars.”

For more information, visit www.dtbassociates.com/docs/DomesticSupportStudy11-2014.pdf and www.dtbassociates.com/docs/domesticsupportstudy.pdf.

USW is the wheat industry’s export market development organization working to promote all six classes of U.S. wheat in more than 100 countries. Its activities are made possible through producer checkoff dollars managed by 19 state wheat commissions and cost-share funding provided by USDA’s Foreign Agricultural Service. For more information, visit our website at www.uswheat.org.

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Nondiscrimination and Alternate Means of Communications
U.S. Wheat Associates prohibits discrimination in all its programs and activities on the basis of race, color, religion, national origin, gender, marital or family status, age, disability, political beliefs or sexual orientation. Persons with disabilities who require alternative means for communication of program information (Braille, large print, audiotape, etc.) should contact U.S. Wheat Associates at 202-463-0999 (TDD/TTY – 800-877-8339, or from outside the U.S.- 605-331-4923). To file a complaint of discrimination, write to Vice President of Finance, U.S. Wheat Associates, 3103 10th Street, North, Arlington, VA 22201, or call 202-463-0999. U.S. Wheat Associates is an equal opportunity provider and employer.