Sugaronline Editorial - It’s not too late to back down By Meghan Sapp

Published: 06/09/2017, 11:34:00 AM

China is headed towards a WTO dispute panel with Brazil, and that's the last thing it needs.



China is headed towards a WTO dispute panel with Brazil, and that's the last thing it needs.

 


As the sugar trade spat between the US and Mexico winds down, another one between Brazil and China is just warming up. And just like the north-south trade challenges, these east-west challenges have been simmering on the back burner for a long time but are at now coming to a boil.

Last October, Brazil joined with Australia and South Korea to complain when China sought to close its market to imports in an effort to “protect” its 20 million small farmers that the country claimed were being hit hard by an increase in imports. Brazil is still competitive paying a 50% import tariff so about half of its exports go to China. Reducing that trade flow to China would in turn hurt Brazil’s own industry.

Just before Christmas, Brazil got word that China wanted to come take a look at the mills where it buys its sugar. It wasn’t a friendly visit between customer and supplier, but very clearly an indication that something was afoot. UNICA thought the visit smelled fishy, indicating an anti-dumping investigation could be brewing.

With China looking to impose safeguards, a rarely used type of trade barrier, Brazil is on high alert for anything that may look to get in the way of its exports. In April, Brazil complained about the direction China was heading at a WTO committee meeting, indicating that an official dispute panel could be called for but not doing so yet.

But this week, UNICA said that the dispute panel was a real possibility because of the hike in import tariffs that China announced in May. The USDA said the tariffs would have a major impact on prices globally because fewer imports into China would greatly disrupt trade flows.

A dispute panel at the WTO is a long, expensive and arduous process but for those who win, it’s worth it. And Brazil is very good at winning. It was winning a WTO dispute panel that forced the European Union to significantly limit sugar exports for more than a decade and completely reform the entire way it subsidises its farmers, trades with developing countries and manages raw imports vs domestic beet production.

It’s no laughing matter and China should be aware of that. A total of 39 disputes have been lobbed against the country since it joined the WTO in 2002, 25 of which came from the United States and several of which were the same case joined by several countries such as the EU, Japan or Canada. But this time it’s different.

This type of dispute panel Brazil would be similar to the ongoing dispute against China launched by the US over wheat, rice and corn imports, a case that the EU, Australia, Canada and Thailand are participating in as well. Should Brazil move forward, Australia, South Korea and Thailand—all of who are also being investigated by China for dumping sugar—would likely get on board too.

China risks losing both cases if it’s not careful, so should take the opportunity to look at how it could save itself from disaster policy-wise and trade-wise before it’s too late.

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