Trade Negotiations and Barriers Archives

USW Submits Trade Barriers Report with Additional Information on Turkish Flour Subsidies

Each year, the Office of the U.S. Trade Representative (USTR) publishes the National Trade Estimates (NTE) report. This report compiles detailed trade barriers that U.S. exporters, including wheat farmers, are facing in markets around the world.

To compile this report, USTR solicits input from export stakeholders to provide details on the specific trade barriers they are facing. Each year, U.S. Wheat Associates (USW) gathers and submits to USTR information from our overseas offices, customers, and other policy information sources in order to paint a full picture of the trade barriers U.S.-grown wheat faces in overseas markets.

Turkey’s Incomplete Subsidy Reporting

USW’s most recent NTE submission to USTR for 2023 reporting can be found here. The submission provides an overview of all key trade barriers that inhibit competitive U.S. Wheat exports in markets around the world. This is a critical annual opportunity for U.S. Wheat farmers to provide USTR with new and updated information with the goal to address these trade barriers to the greatest extent possible in the coming year.

While some issues USW submits for the NTE report may show incremental progress over time, other areas provide critical, timely feedback on changes in the trade barrier landscape. This year, in addition to other global barriers, USW included an up-to-date review of Turkey’s trade distorting subsidy practices.

Turkey is Non-Compliant

Turkey maintains a web of substantial domestic support programs that incentivize the overproduction of Turkish flour, which can then be dumped into overseas markets below global price levels. This dumping of heavily subsidized Turkish flour displaces domestic milling industries, and in turn, U.S. wheat exports. In this year’s NTE submission, USW updated data on Turkish domestic price supports to show that while these subsidies still exist, Turkey has failed to properly disclose them to the World Trade Organization (WTO). In fact, while Turkey has recently caught up with many of their required WTO subsidy notifications (although they have still only notified through 2016), they make no mention of wheat price supports.

“The support price is up slightly from last year and still provides an extraordinarily strong price signal to Turkish farmers that is well above global market prices and keeps Turkey noncompliant with its WTO commitments. Turkey needs to be transparent and pushed to submit timely and accurate notifications that cover all programs, including product-specific input subsidies that are available to wheat farmers.” – From USW NTE Submission for 2023

In addition to updates on Turkey’s data discrepancies, USW has also identified and detailed a previously unreported freight subsidy further incentivizing flour exports. This subsidy is provided as a cash refund to exporters for the transportation of wheat flour. Formal documentation of the subsidy is limited, and once again, Turkey does not detail this practice in their annual notification to the WTO.

USW will continue to work closely with USTR to better understand and document how this practice, and other subsidies, distort multiple major export markets for U.S. wheat farmers. USW estimates that eliminating unfair competition from cheap Turkish flour exports would increase returns to U.S. wheat producers by $100 million to $500 million per year.

By Peter Laudeman, USW Director of Trade Policy

November 1, 2022/by Steve Mercer

Board of Directors, Exports, Marketing and Trade Conferences, South America, Trade Negotiations and Barriers, Vince Peterson

U.S Wheat Reconnects with Brazilian Millers at Annual Industry Meeting

Building upon its long relationship with Brazilian flour millers while also learning about current market conditions across South America, U.S. Wheat Associates (USW) recently took part in the Abitrigo Congress in Foz de Iguazu, Brazil.

During this year’s Abitrigo Congress, USW presented a course completion certificate for its Online Baking Certification program to the owner one of Brazil’s largest milling companies.

Abitrigo, the association representing the Brazilian wheat milling industry, had not held an in-person annual meeting since 2019. USW President Vince Peterson said attendees from all industry sectors were thrilled to finally be able to engage in business face-to-face.

“Everyone we spoke with noted how nice it was to be back together,” said Peterson, who was joined by USW Vice Chairman Michael Peters and staff members from the USW Santiago Office. “Our presence is a way to show how important Brazilian millers and buyers are to U.S. wheat producers and the entire U.S. wheat industry. It gives us an opportunity to interact with key wheat buyers and have discussions with both new and long-time representatives of the mills.”

Peters, who was attending his first Abitrigo meeting, was impressed with the work of the USW Santiago office, which was represented by Regional Director Miguel Galdos, Assistant Regional Director Osvaldo Seco, Technical Specialist Andres Saturno and Senior Marketing Specialist Claudia Gomez.

“It was very clear that our staff has tremendous relationships with millers in that part of the world and have earned the respect of the industry,” said Peters, a wheat producer and cattle rancher from Okarche, Oklahoma. “It is a tough and competitive market for U.S. wheat, but we’ve remained connected and have done a great job of maintaining U.S. wheat’s reputation for providing a high-quality product.”

USW took center stage during one segment of this year’s meeting when it presented a course completion certificate for its Online Baking Certification program, a new USW technical project that promotes baking methods using all six U.S. wheat classes. The recipient owns one of Brazil’s largest milling companies.

“Having a significant business owner take her personal time to take the USW baking course is quite a compliment,” Peterson noted.

Abitrigo provides more information about its endorsement of the USW Online Baking Certification program on its website.

While Brazil has been importing U.S. wheat for more than 40 years, it still is an extremely competitive market due to Brazil’s domestic production and advantages enjoyed by some U.S. competitors, including Argentina and other countries that have mostly duty-free access under the Mercosur Agreement. In 2019, Brazil agreed to implement an annual duty-free tariff rate quota (TRQ) of 750,000 metric tons of wheat imports from countries not part of the Mercosur Agreement.

Peterson pointed out that the quality of U.S. wheat remains desirable to many Brazilian buyers.

“The core of the Brazilian milling industry recognizes that U.S. hard red winter (HRW) and soft red winter (SRW) wheat – and even hard red spring (HRS) wheat, which has been purchased by Brazilian customers this year – are the most applicable wheat sources to produce the best quality Brazilian wheat food products. Because of this, the market continues to be a long-term priority. And we will continue providing the best service and support we can to Brazilian millers and bakers.”

October 12, 2022/by Ralph Loos

Dalton Henry, Trade Negotiations and Barriers, Trade Policy

Indo-Pacific Economic Framework: Perspective On Its Potential

This week, the Biden Administration launched a signature foreign policy initiative aimed at increasing economic involvement across Southeast Asia. The initiative is called the Indo-Pacific Economic Framework for Prosperity or IPEF.

According to the initial declaration issued by the participating countries, it “intends to advance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness for our economies. Through this initiative, we aim to contribute to cooperation, stability, prosperity, development, and peace within the region.”

TPP Replacement?

While touted by some in the United States as a replacement for the Trans-Pacific Partnership (TPP) for economic engagement in the Southeast Asia region, what has been revealed so far about the Indo-Pacific Economic Framework is quite different from Free Trade Agreements (FTA) like TPP. Unlike an FTA, the IPEF has no plans for addressing tariffs, instead featuring four “pillars” that individual countries can choose to opt-in or out of.

Those pillars are:

Trade
Supply Chains
Clean Energy, Decarbonization and Infrastructure
Tax and Anti-corruption

The initial countries agreeing to launch the discussions include key U.S. wheat markets such as Japan, the Philippines, Korea, Indonesia, Thailand, Vietnam, and Malaysia. Others include Australia, Brunei, India, New Zealand and Singapore.

Next Steps

These countries have not yet stated which pillars of the Indo-Pacific Economic Framework they intend to join. The outcome of those individual country decisions will likely come after initial negotiations establish the scope of issues to be addressed by each pillar, and for the trade section, this will have far-reaching implications for the value of any subsequent agreement.

The timeline for reaching final agreements across all pillars ranges from 12 to 24 months, making it a hopeful first-term effort for President Biden. IPEF is not expected to require Congressional approval because it would not change U.S. law. Changes would require the U.S. Trade Representative to consult with and eventually seek approval from the U.S. Congress.

This also avoids the need for Trade Promotion Authority (TPA), which expired nearly a year ago. Politically, TPA is often seen as a prerequisite for large-scale negotiations because it delegates some negotiating powers from Congress to the administration and establishes processes for formal consultation and expedited voting for eventual agreements.

With no congressional approval, required an aggressive timeline is more likely for IPEF. However, it also indicates that the scope of the trade pillar will likely be limited in depth.

By Dalton Henry, U.S. Wheat Associates (USW) Vice President of Policy

May 26, 2022/by Steve Mercer

Cuba, Dalton Henry, Trade Negotiations and Barriers

U.S. Agriculture Jumps Back on the Cuba Relations Roller Coaster

U.S.-Cuba relations have been up and down like a roller coaster in the 11 years since the last U.S. wheat export shipment to Cuba. Last week, U.S. Wheat Associates (USW) staff traveled to the island nation as part of a U.S. agricultural conference to see and hear firsthand about trade opportunities – despite frosty bilateral relations.

There is no clearer example of that roller coaster than in the U.S. embassy. After being shuttered for more than a half-century, the embassy was reopened in 2015 during the Obama administration as a sign of goodwill and a hopeful return to a bilateral relationship. Closed in 2017 after never-proven allegations Cuba had perpetrated a “sonic attack” on diplomats, it now operates on a limited basis. Yet relations are so low that the U.S. government has refused to repair recent hurricane damages.

Image shows a meeting in Cuba of the U.S. Agriculture Coalition for Cuba

Cuban Meeting. The U.S. Agriculture Coalition for Cuba sponsored a recent meeting for U.S. agricultural representatives, including USW, with Cuban officials and business interests.

Demanding Respect

That roller coaster in relations continued in the recent conference, where high points about the potential of increased trade and renewed relationships were mixed with harsh rhetoric. Throughout three days of meetings and events with government officials, private business owners and conference attendees, the U.S. delegation repeatedly heard about the harm of the U.S. embargo on Cuba, and especially about tightened measures put into place under the Trump administration. Listing Cuba as a state sponsor of terror and further restricting the ability of U.S. business operations garnered a great deal of ire from the Cuban speakers.

Though conducting business with Cuba is more bureaucratically challenging for U.S. companies than nearly anywhere else on earth, Cuba can and does still purchase some U.S. commodities. The prime example is chicken. Cuba now ranks as a top-three destination for U.S. chicken exports.

Complex Situation

The competitive situation for wheat is much more complex than the products they currently purchase. While the United States has a proximity and logistical advantage over any other wheat supplier, Cuban officials said other countries routinely offer generous credit terms of one to two years. Access to any level of financing has proved particularly important to Cuba, given its relative shortage of hard currency.

Agricultural trade with Cuba was authorized under strict terms with the passage of the Trade Sanctions Reform and Export Enhancement Act of 2000. However, the act required onerous payment terms such as full cash payment in advance of exports, use of third-country banks and travel restrictions on cargo vessels between the two countries. Though that policy sparked sales of U.S. commodities for a few years, the Cuban economy continued to struggle, and those terms have become overbearing. The result has been widespread economic distress for the Cuban people, who are now challenged to secure affordable food. Their stories include bread shortages and state-sponsored food ration supplies being unavailable.

Cuba Needs Wheat

Before COVID, Cuba regularly imported an average of 750,000 metric tons of wheat. That volume would likely make Cuba a top-ten market for U.S. wheat under a normal trading relationship. However, a true “normal” relationship would extend beyond just access to private credit and connections between U.S. and Cuban banking sectors to facilitate trade. For Cuba to reach its full potential as a U.S. commodity export destination, it would likely require the enablement of two-way trade – selling Cuban produce and processed products in the U.S. market. That development would go beyond the agricultural sales provisions of the laws that currently allow one-way trade with Cuba.

End the Embargo

While that may be a worthy goal of opening up to Cuba, in the meantime, U.S. growers need Congress to act. Access to the same payment and shipping terms offered to any other wheat market is a good and reasonable starting point.

The United States has long had a policy of not using food as a weapon. It is past time for us to be honest with our own rhetoric in the case of our closest Caribbean neighbor.

By USW Vice President of Policy Dalton Henry, who represented USW on the trip sponsored by the U.S. Agriculture Coalition for Cuba.

April 14, 2022/by Steve Mercer

China, Trade Negotiations and Barriers, Wheat Industry News

Wheat Industry News

Recent news and highlights from around the U.S. wheat industry.

Speaking of Wheat

“The retaliatory tariffs led to a significant reduction in U.S. agricultural exports to retaliating partners. Nationally, direct U.S. agricultural export losses due to retaliatory tariffs totaled more than $27 billion during 2018 through the end of 2019. Across retaliatory partners, China accounted for approximately 95 percent of the losses ($25.7 billion) …” — From “The Economic Impacts of Retaliatory Tariffs on U.S. Agriculture,” a study by the USDA Economic Research Service.

Market Outlook Webinar

The Northern Crops Institute (NCI) Market Update webinar series will feature Jeffrey McPike with WASEDA Commodities Inc. for its next webinar, Feb. 16, 2022. McPike will review the 2022 market outlook for wheat, corn and soybeans. Register for the webinar here. Previous NCI Market Update webinars are posted online, including a look at durum markets on Feb. 2 by Jim Peterson, Policy and Marketing Director, North Dakota Wheat Commission.

Wheat in the Spotlight

Wheat is back in the national and international news these days. Reporters have asked U.S. Wheat Associates (USW) to comment on how a Russian invasion of Ukraine would affect wheat prices (about which we do not speculate). The Wall Street Journal and Forbes reported on that topic. Fortune.com wrote about higher costs for Lunar New Year treats like sponge cakes and pineapple tarts based on smaller U.S. soft white wheat supplies. Bloomberg published a similar article.

Sufficient Moisture

Kansas wheat farmers reported last week during a board meeting of the Kansas Association of Wheat Growers that wheat fields across Kansas were generally planted into sufficient moisture conditions and went into winter with decent stands. But more moisture will be needed over the winter and into the spring to kickstart a crop emerging from dormancy and maintain growth. Read more here.

2022 Northern Crops Institute Courses

The Northern Crops Institute (NCI) in Fargo, N.D., has available courses in 2022 for online and in-person instruction. Available courses include a Pasta Production and Technology course in April. Learn more about NCI courses and how to register here.

2022 IGP Institute Flour Milling Course Schedule

The IGP Institute in Manhattan, Kan., has several upcoming flour milling and grain processing courses available in 2022. Courses in this curriculum area cover aspects of managing the flour milling process, from grain selection to finished products. Learn more about IGP Institute courses and how to register here.

Subscribe to USW Reports

USW publishes various reports and content that are available to subscribe to, including a bi-weekly newsletter highlighting recent Wheat Letter blog posts and wheat industry news, the weekly Price Report and the weekly Harvest Report (available May to October). Subscribe here.

Follow USW Online

Visit our Facebook page for the latest updates, photos and discussions of what is going on in the world of wheat. Also, find breaking news on Twitter, video stories on Vimeo and more on LinkedIn.

February 3, 2022/by Steve Mercer

China, Trade Negotiations and Barriers, Trade Policy, World Trade Organization (WTO)

China Exceeded Annual Wheat TRQ Volume in 2021

China’s latest customs numbers are in, and the news is significant. After clearing 933,500 metric tons of wheat through customs in December, China in calendar year 2021 exceeded its 9.636 million metric ton (MMT) annual wheat TRQ (tariff rate quota) established in its World Trade Organization (WTO) membership. The official tally was 9.718 MMT of imported wheat.

According to customs, Australian wheat and U.S. wheat at more than 2.7 MMT each were China’s largest suppliers in 2021. The difference between them is a mere 9,000 metric tons. That is about the volume that fits into one hold on a bulk freight vessel.

Customs data showed China exceeded its annual wheat TRQ in part by importing 2.544 MMT of Canadian wheat and 1.412 MMT of French wheat in 2021. The volume China imported from those four wheat suppliers indicates to U.S. Wheat Associates (USW) that buying from deep and transparent markets with good ocean shipping infrastructure is still attractive to China’s buyers. The remaining 3% of its total 2021 imports arrived from Kazakhstan and Russia.

Image of U.S. HRW wheat and list of functional benefits included to show how China exceeded its annual wheat TRQ with help from USW.

Introducing HRW Wheat. China imported a significant amount of U.S. hard red winter (HRW) wheat in 2021. So in September, USW used presentations (above) and technical demonstrations to help Chinese millers and grain buyers understand the functional benefits of HRW.

U.S. Wheat Demand

In December, a private buyer purchased a small container-load of U.S. wheat. That helped lift China’s total U.S. imports in the second half of calendar year 2021 t0 848,000 metric tons. The obvious, recent slow-down in U.S.-origin wheat arrivals is disappointing. But it is not surprising. In fact, U.S. export wheat prices are now above domestic Chinese prices on a Cost and Freight basis.

China’s private milling and wheat food manufacturers serve an increasingly sophisticated consumer market. Their demand for four classes of high-quality U.S. wheat remains strong. That is why our experienced, professional USW China team members continue to educate industry customers about U.S. wheat value and functionality. We are pleased that COFCO, China’s state trading company, welcomes our activities that, we believe, helped China exceed its annual wheat TRQ.

Practical Guidance

A good example from 2021 was a three-day “Contracting for Wheat Value” seminar in July for 32 participants representing 11 non-state and state Chinese trading companies and mills. The goal of the seminar was to help the participants become better-prepared buyers. USW provided practical guidance on writing contract specifications that take advantage of U.S. wheat crop and market situations and much more. According to input from the meeting participants, our goal was achieved.

Chinese wheat buyers participated in a USW Contracting for Wheat Value seminar in 2021, part of effort to help China exceed its annual wheat TRQ in 2021.

Contracting for Wheat Value. USW combined an in-person meeting in Guangzhou, China (above), with video and virtual presentations in July 2021 to help Chinese wheat buyers better understand the U.S. wheat export system.

Policy Plays Its Role

We also respectfully look for help from policymakers on both sides. Since the Phase One agreement, U.S. wheat sales to China are far above USW’s pre-trade war average. As USW Vice President of Policy Dalton Henry noted one year ago, policymakers “would do well … to pick up where Phase One left off and continue to build on the tremendous export potential for China.”

It is true that some uncertainty will remain in U.S.-China trade relations. It is also true that opportunities will emerge to do business in China. USW has support from our farmers and USDA Foreign Agricultural Service export market development programs. And USW will stay engaged in keeping our Chinese customers informed about the quality, variety and value of U.S. wheat. So hopefully, next January, we will see that China has once more exceeded its annual wheat TRQ.

Finally, we wish all our customers and friends peace and good health in the Year of the Tiger!

By Jeff Coey, USW Regional Vice President, China, Hong Kong and Taiwan

January 27, 2022/by Steve Mercer

India, Trade Negotiations and Barriers, Trade Policy, World Trade Organization (WTO)

Congress Shines Spotlight on India’s Trade-Distorting Domestic Wheat and Rice Support

U.S. Wheat Associates (USW) is very pleased that several members of Congress have asked Secretary of Agriculture Tom Vilsack and U.S. Trade Representative Katherine Tai to pursue a World Trade Organization (WTO) case against India’s trade-distorting domestic wheat and rice support.

In separate letters to those officials, members of the U.S. Senate and House of Representatives noted that while India is limited to providing 10% support for crop inputs under its WTO agreement, the government subsidizes half the total cost of wheat and rice production and recently announced a massive new subsidy for fertilizer. The letter also reminds Ambassador Tai and Secretary Vilsack that the United States counter-notified India’s claim that it meets WTO limits on price support. However, India’s government continued raising the guaranteed prices it pays to purchase wheat and rice.

India’s subsidies lead directly to domestic supplies that far exceed India’s acknowledged need for stockkeeping – stocks the government cannot store effectively. As a result, the government unloads stocks into the export market, often at prices below what it paid to purchase the wheat. USDA estimates Indian wheat exports for the marketing year ending June 30, 2022, will be 5 million metric tons (MMT). This leaves almost 28 MMT of wheat stocks remaining.

Chart shows Indian wheat production and exports to illustrate trade distorting wheat and rice subsidies

India’s wheat subsidies encourage over-production, pushing India into the global export market. As a result, stocks exceeding the government’s ability to store wheat periodically distorts trade. Source: USDA Foreign Agricultural Service Production, Supply and Distribution Databases.

The distortion of international wheat and rice trade from these policies is severe, costing U.S. wheat farmers more than $500 million per year in lost income according to a 2020 Texas A&M University study commissioned by USW and USA Rice.

Wrong Subsidies, Wrong Time

Subsidies encouraging over-use of agricultural production inputs are not appropriate when the world is concerned about agriculture’s environmental footprint. We ask the question why is India subsidizing fossil fuel and chemical fertilizer use? Why is India subsidizing over-production that encourages the cultivation of more marginal land?

U.S. wheat and rice farmers rely on open markets and fair trade to sustain their ability to feed the world. USW joins members of Congress and the National Association of Wheat Growers in calling on India to adhere to its international commitments and willingness to work with USDA and the Office of the U.S. Trade Representative to maintain the competitiveness of U.S. wheat in the world.

Graph shows various wheat subsidies reported to WTO.

The U.S. government submits this data to the WTO by the U.S. government as part of a counter-notification. This data shows a wide discrepancy between actual domestic wheat support and the Indian government’s submission.

January 19, 2022/by Steve Mercer

Trade Negotiations and Barriers

WTO Ministerial Postponed; U.S. Agriculture’s Engagement to Continue

Though disappointed in the postponement of the 12^th World Trade Organization (WTO) Ministerial Conference this week, U.S. Wheat Associates (USW) will continue working with U.S. agricultural interests toward positive reform of this important organization.

As a member of a U.S. agricultural coalition that is speaking up on the importance of the WTO, USW representatives were set to attend the WTO ministerial “MC12” in Geneva, Switzerland. Ms. Sharon Bomer Lauritsen, the founder of Ag Trade Strategies, LLC, and a former Assistant U.S. Trade Representative for Agricultural Affairs and Commodity Policy, supports the coalition and recently outlined key positions on the WTO in a co-authored Agri-Pulse editorial.

“The WTO is a crucial element in facilitating global trade, but it is in need of reform,” she and her co-author wrote on Nov. 24, 2021. “To revitalize and restore confidence in the WTO, attention must be paid to addressing government policies that distort production and trade, including tariffs and trade distorting domestic support.”

In remarks made to business interests just before the WTO ministerial was postponed, however, WTO Director-General Ngozi Okonjo-Iweala had little optimism for substantial progress on agricultural domestic support negotiations.

There is a stand-off over price supports used for public stocks between some developing countries like India and China and a group of developed and developing countries, especially the United States and several Latin American countries. India, for example, fiercely protects its trade distorting subsidies for wheat and rice as part of its public stockholding program for food security. Unfortunately for the rest of the world’s wheat and rice producers, these hefty subsidies can lead to larger stocks and the need for India to export these grains, often at lower prices than the costs the government incurred for the grain.

The U.S. coalition is also concerned that WTO members are not complying with their transparency requirements for reporting on domestic agricultural subsidies. Less than half of WTO members have submitted notifications on their subsidies since 2016, and many of those are incomplete, manipulated data, or incorrectly categorize their policies.

Data from the WTO shared as part of U.S. dispute cases and counternotifications reflect this issue. The graph below shows the wide disparity between the wheat subsidy levels China and India reported and the actual levels identified by a WTO dispute panel and other members.

Source: World Trade Organization.

Improving transparency requirements for policies impacting agriculture trade and notifications of current commitments was a realistic outcome from the MC12 meeting that USW and the U.S. coalition will continue to encourage.

USW strongly supports the WTO’s mission to liberalize world trade. In a July 2021 letter, USW and the National Association of Wheat Growers joined dozens of other agricultural organizations in sharing key priorities for the WTO to U.S. Trade Representative Katherine Tai and U.S. Secretary of Agriculture Tom Vilsack.

“The WTO has served American farmers, ranchers, and workers across the food and agriculture sector well, but in recent years the flaws in the system have become apparent,” the letter stated. “Reform is … needed, including changes that lead to a market opening agenda for agriculture and a better functioning institution. These changes can help improve global agricultural sustainability and support rural communities, workers, and better-paying jobs.”

USW believes a “better functioning” WTO will also benefit our wheat importing customers around the world.

November 30, 2021/by Steve Mercer

China, Trade Negotiations and Barriers, Trade Policy, World Trade Organization (WTO)

Chinese Government Grain Policy TRQ Dispute Moving Ahead

By Ben Conner, Partner, DTB AgriTrade

Over the last several years, U.S. Wheat Associates (USW) and other industry groups have demonstrated how the policies of a few advanced developing countries are distorting world wheat trade and hurting farmers in the United States and other wheat exporting countries. Chinese government grain policy attracted special attention, leading to two dispute cases at the World Trade Organization (WTO), one on excessive subsidies and one on China’s administration of a tariff rate quota on wheat, corn, and rice. By April 2018, WTO dispute panels had sided with the United States in both cases.

Today, the official settlement process for one of those cases has entered the next phase. On July 26, 2021, the United States asked the WTO Dispute Settlement Body (DSB) for authorization to raise tariffs on imports from China due to its failure to comply with the DSB recommendations on its tariff-rate quota (TRQ) administration. China blocked the request, which puts the matter before an arbitration panel. Simultaneously, China made its own request for another panel to review whether it has brought its policies into compliance.

Very close observers of WTO processes might experience deja vu because this is exactly what happened with the case on China’s subsidies for the same commodities last summer.

The next step is for the WTO to form two panels to review the requests of both China and the United States. The compliance panel will look at whether China’s TRQ administration is now functioning on a “transparent, predictable, and fair basis … using clearly specified administrative procedures,” as required by the DSB recommendations. An arbitration panel will review the U.S. request to raise tariffs and decide whether its methodology is appropriate.

Two Reasons for the Challenge

Why is the U.S. government taking this step forward on this case? After all, China has been importing record amounts of wheat and corn since the signing of the Phase One deal (rice is notably lagging) that included implementation of the WTO recommendations on TRQs and subsidies. There are two main reasons.

Procedurally, the U.S. government had to continue extending the window for China to comply (they had already agreed to seven extensions), allow that window to expire with no further action and forfeit its right to suspend concessions, or request that right within 20 days after the window expired. It chose the third option.

Even though China has allowed higher imports, there is still little clarity on how TRQ shares are allocated and reallocated.

If the process remains opaque and unpredictable, China will not be in compliance with its TRQ obligations, which could prevent imported wheat with qualities supplementing Chinese domestic wheat from reaching the Chinese wheat millers who could use it most effectively. It is encouraging that the U.S. and Chinese governments are continuing this case as it will help resolve disagreements over whether China is in compliance with its TRQ commitments and exert pressure to fix problems with Chinese government grain policy permanently.

July 28, 2021/by Erica Oakley

Cuba, Dalton Henry, Trade Negotiations and Barriers, Trade Policy

Only an Act of Congress Can Open the Cuban Wheat Market

It is a country that imports about 800,000 metric tons of wheat each year, a mere 90 miles from the United States. Yet the Cuban wheat market has long been a source of optimism and frustration for U.S. wheat farmers. With the change in administrations, there is hope for re-engagement with Cuba, but ultimately the 60-year-old embargo and associated policies still stand as a solid barrier to beneficial trade.

General public opinion polls on Cuba policy consistently show most Americans favor more engagement, the last decade has seen a roller coaster of changes in U.S. policy. Under the Obama-Biden Administration, there were efforts to establish a new relationship and relax tensions. This included a new interpretation of “cash in advance” rules that apply to payment for any agricultural commodities, bilateral exchanges by technical staff in regulatory agencies and the reopening of the U.S. embassy in Havana. However, none of those changes resulted in actual wheat purchases. Then the Trump Administration further restricted trade by limiting any business conducted between American companies and state-owned companies (such as flour mills) in Cuba.

“Wheat is an important food grain that should be above politics, but the embargo will likely have to end before wheat farmers can help … feed the Cuban people.”

With Biden’s return to the White House, Cuba watchers are anxiously awaiting the next curve in the roller coaster ride and are optimistic the administration will return to the Obama-Biden policy of re-engagement. However, any realistic effort to expand ag trade with Cuba needs to focus on the other end of Pennsylvania Avenue by working to secure meaningful change within the halls of Congress and addressing the bipartisan opposition to trade with Cuba.

Just such a Congressional effort was launched last week by U.S. Senators John Boozman of Arkansas and Michael Bennet of Colorado with the introduction of the Agricultural Export Expansion Act. That bill would allow private financing of agricultural commodities by U.S. companies – a small first step toward normalizing the trading relationship, but an important one to put U.S. companies on a near level playing field when working with Cuban buyers. Several U.S. agricultural organizations including U.S. Wheat Associates (USW) and the National Association of Wheat Growers (NAWG) signed a letter of support for the effort as ad hoc members of the United States Agricultural Coalition for Cuba.

More Legislation

The Ag Export Expansion bill is not the only pro-normalization effort within Congress. U.S. Senators Jerry Moran of Kansas, Amy Klobuchar of Minnesota and Patrick Leahy of Vermont, all long-time Cuba trade advocates, earlier this year introduced the Freedom to Export to Cuba Act, which would lift substantial portions of the embargo, including restrictions prohibiting transactions between U.S. and Cuban firms.

Farmers are right to be interested in opening the Cuban wheat market. Cuba produces no wheat domestically and would be a substantial U.S. market if government barriers were to be lifted. But for any of that optimism to come to fruition, it is going to take a literal act of Congress.

“Wheat is an important food grain that should be above politics,” said former USW President Alan Tracy in 2017, “but the embargo will likely have to end before wheat farmers can help meet the increasing demand for agricultural products to help feed the Cuban people.”

By Dalton Henry, USW Vice President of Policy

June 17, 2021/by actualize