Trade

“Crazy” Farm Purchases Might Violate WTO Rules

JM Ashby
Written by JM Ashby

Although Chinese officials still haven't publicly committed to buying the fantastical amount of American farm goods that the Trump regime is promising -- a number that keeps getting even more ridiculous -- it's possible that doing so would actually be illegal.

China has only said they will buy American farm goods at a level that consumer demand and market conditions support and former officials and trade experts say that's because buying more than that could be illegal under World Trade Organization (WTO) rules.

Calling it a “crazy amount” of agricultural buying with “market distorting powers” on a global scale, Deborah Elms, executive director of the Asian Trade Centre, said: “The ramping up of scale at that speed is going to be problematic.”

She told CNBC: “I would be willing to take a bet ... that we will be back at this table in relatively short order even if we get a deal, because the ability of the Chinese to actually match those purchases is going to be limited.” [...]

Elms warned that the Chinese has been “very cautious” in saying that they would buy according to market conditions and World Trade Organization restrictions.

In other words, if China buys more than the market can support for political reasons, it may actually be an illegal subsidy that distorts the market according to the WTO.

Trump would probably balk at the notion but, as you know, he does not feel the same when the WTO rules in his favor; like when the WTO ruled in favor of his tariffs on European goods in response to subsidies for Airbus.

If China buys more American farm goods than they have real demand for, it would be an illegal subsidy for American farmers that puts other farmers in countries at a disadvantage. Other countries could seek judgments against those subsidies just as Trump has sought for Europe's subsidies.

I suppose the good news for Trump is that, if it ever comes to that, he has already effectively killed the WTO by refusing to appoint any new judges to the trade body's appellate court.

Privately, China may not be any more sincere about adhering to WTO rules than Trump is, but taking this stance in public could give them a legitimate reason for not buying as much as Trump is promising.

  • muselet

    Donald Trump would be happy to violate WTO regulations on market distortions and subsidies, because he doesn’t recognize the organization’s legitimacy. Again I say, his attitude echoes Stalin’s (probably apocryphal) jibe: “How many divisions has the Pope?”

    China, on the other hand, worked long and hard to gain WTO recognition. Its leadership won’t blatantly defy the organization (it will play fast and loose with the rules, sure, but with a little bit of plausible deniability built in).

    This is likely to get ugly, and even uglier if Trump gets his way and manages to destroy the WTO.

    –alopecia

  • Nefercat

    China may not be any more sincere about adhering to WTO rules than Trump is, but taking this stance in public could give them a legitimate reason for not buying as much as Trump is promising

    China will always be one step ahead of the incompetent orange gasbag because he does not know how to negotiate and he does not know how to make deals.