As of August 23, the United States has imposed tariffs on all $50 billion of goods announced under China's Section 301 investigation。China has also retaliated, imposing tariffs on about $50 billion of U.S. goods exported to China。The US government has promised to assist US companies affected by the tariff retaliation。
The United States has initiated assistance measures in the agricultural sector in response to tariff retaliation
On July 24, the US Department of Agriculture announced it would approve up to $12bn in agricultural aid under its WTO obligations。The assistance will help U.S. agricultural producers pay for some of the increased costs caused by the impact of the tariffs。
On August 27, the U.S. Department of Agriculture announced action details to implement agricultural assistance measures for U.S. farmers。U.S. Agriculture Secretary Sonny Perdue noted that President Donald Trump has directed the development of a short-term relief package to protect U.S. agricultural producers and, in the long run, will help open more markets to U.S. agricultural producers and promote global competition in U.S. agriculture。
The aid package consists of three programmes
I. Market Promotion Program (MFP)
The MFP is based on the New Deal Commodity Credit Corporation (CCC) Charter Act.。For assisted commodities, payment rates would depend on the severity of trade retaliatory measures and the time required to adjust new trade patterns to the actual production situation of each producer。
Under the Market Promotion Program, USDA's Agricultural Service Administration (FSA) will implement the first phase of the program starting September 4, 2018, with an initial amount of $4.7 billion。The subsidies are mainly aimed at corn, cotton, dairy, hog, sorghum, soybean and wheat producers。Soybean farmers received the highest amount of $3.6 billion, followed by pork producers, who received $2 billion.$900 million, in addition to: cotton 2.$7.7 billion;Sorghum 1.$5.7 billion;Milk 1.$2.7 billion;Wheat 1.$200 million;Corn 0.$9.6 billion。In addition, payments to individuals are subject to farmer income restrictions, capped at 12.Fifty thousand dollars。
The first payment amount is calculated by multiplying 50% of the producer's 2018 actual production by the applicable MFP ratio。The payment amount for the second MFP payment phase is calculated by multiplying the remaining 50% of the producer's actual 2018 production volume by the MFP payment rate。
Food procurement and distribution plans
The amount of goods purchased is based on an economic analysis of the damage caused by unjustified tariffs on agricultural products, adjusted for several factors and spread over several months based on orders to participate in the USDA's Nutrition Assistance Program。
Under the Food Procurement and Distribution Program, the USDA will purchase up to 12.$400 million worth of merchandise。So far, we have decided to buy 29 categories of products, including grapes, beef and apples。In addition, the two categories of goods in the US purchase plan that have not yet been finalized for purchase are almonds and sweet cherries, totaling 1.$7.5 billion。
Usda's Food and Nutrition Service (FNS) will distribute these commodities through nutrition assistance programs such as the Emergency Food Assistance Program and the Child Nutrition Program。
Iii. Agricultural Trade Promotion Program (ATP)
The U.S. Department of Agriculture's Agricultural Service Administration administers the Agricultural Trade Promotion Program。ATP will provide $200 million to develop overseas markets for U.S. agricultural products, help U.S. agricultural exporters access new markets, and help mitigate the negative impact of restrictions in other countries。ATP, which aims to help all sectors of U.S. agriculture, including producers of fisheries and forest products, will provide cost-sharing assistance to eligible U.S. organizations。The ATP's application is open by November 2, 2018, and funding will be allocated in early 2019。
PIIE: Trump's farm aid measures violate WTO rules
As for the US agricultural aid measures, the Peterson Institute for International Economics (PIIE) published an article pointing out that Trump's agricultural subsidy measures will not save the US agriculture。Trump's reckless tariff actions are the direct cause of the enormous economic hardship that American farmers are currently facing。
U.S. agricultural exports have been subject to retaliatory measures from several countries。So far, six trading partners are retaliating against U.S. agricultural exports in response to Trump's massive tariffs on steel, aluminum and China since 2018, affecting a total of $27 billion in U.S. agricultural exports。Although agricultural exports to China accounted for 75 percent of total exports, Canada, the European Union, Mexico, India and Turkey also made significant cuts to about $7 billion in U.S. agricultural exports。
PIIE's analysis of major US agricultural exports shows，2017年，U.S. soybean exports amounted to $21.7 billion，So far，64% of soybeans ($13.9 billion) were targeted in retaliation;Nearly $1 billion in annual exports of nuts, sorghum and fruit are also affected by tariffs。
Trump's solution is to use US taxpayers' money to subsidize farmers, a practice that violates WTO rules。The PIIE singled out the Agricultural Trade Promotion Program (ATP) as perhaps the most misguided and irresponsible attempt to open foreign markets that have been deliberately closed by tariff actions。
Since the 1990s, the United States has found that cutting support and subsidies for agricultural products has brought great dividends to the United States in the WTO agricultural negotiations, so the United States began to support free trade in food。Under the WTO framework, the United States has agreed to limit its trade-distorting practices in the agricultural sector, that is, from 2000, the United States will not exceed the annual cap of $19.1 billion in agricultural support。In this round of trade war, the US Department of Agriculture may construct a subsidy scheme that is decoupled from the market, but Trump's subsidies will still raise questions from major trading partners and may trigger the WTO dispute settlement mechanism。At the very least, it will make it harder for US WTO negotiators in multilateral talks to persuade other trading partners to rein in their farm subsidies。
(Mechanical Think Tank Researcher/Shi Yunqing)