The US says Beijing's cotton price supports have breached global trade rules and wants China's support levels to be examined. China is the world’s top cotton grower. The US says prices paid to farmers by the Chinese government under the country’s farming policy exceed those allowed by the World Trade Organization. It has estimated Beijing's support has exceeded the allowed level of 8.5 per cent of the country’s crop production value for the past four years. It represented 29 per cent of production value in 2014 and exceeded 30 per cent in both 2012 and 2013.
The face-off comes at a tumultuous period for the global cotton industry. Prices have plunged by a third to loss-making levels for most US farmers as Beijing unravels a years-long stockpiling program that has bolstered global prices and demand. The authorities are replacing it with a farmer payment program and have said they will reduce import demand in 2015. That has sparked fears global inventories will swell because of reduced demand from the world’s largest buyer.
The new China policies come on the heels of the settlement of a decade-old dispute between the United States and Brazil over US cotton subsidies. The case led to an overhaul of US cotton policy and a 300 million dollar settlement.
