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Why China, The World's Largest Rice Producer, Quietly Bought U.S. Rice Last Year

RACHEL MARTIN, HOST:

The world is fixated on the U.S.-China trade war. But there's another tariff fight with China happening behind the scenes with a lot of money at stake, a battle over rice. Planet Money reporters Cardiff Garcia and Sally Herships explain why China agreed to buy two shipping containers of rice from the United States.

SALLY HERSHIPS, BYLINE: Very quietly last winter, China agreed to buy some rice from the U.S. - two shipping containers-full.

JIM GUINN: So that's the first sale of rice to China in recent history.

CARDIFF GARCIA, BYLINE: Jim Guinn is with the USA Rice Federation, a trade association. And I think we should all just pause here for a minute because we are talking about China buying rice from America. China is the world's largest producer of rice - 200 million tons a year it produces.

HERSHIPS: The plan for China to buy rice from America, it has been cooking for a really long time.

GARCIA: Nice.

HERSHIPS: (Laughter). And while administrations were changing, trade policies were shifting, rice importers and exporters on both sides of the ocean were left waiting. So this story really gets its start back in 2001. That is the year China joins the World Trade Organization. The job of the WTO is to oversee trade between different countries. If you join, you get to benefit from all these special trade deals with the other member countries. And for the already established members, when a country as big as China joins, it can mean all these potential new customers. So as part of the deal it cut when it joined the WTO, China agreed to make it easier and cheaper specifically for 5.3 million tons of foreign rice to come into the country.

JOE GLAUBER: In the rice world, that's a lot of rice.

GARCIA: Joe Glauber is a senior research fellow at the International Food Policy Research Institute and a former chief economist at the U.S. Department of Agriculture. So this deal happens, and rice farmers are getting psyched. Exporters are getting really excited. But there was a problem. China reneged on its side of the deal. China was not making it easier or cheaper to import foreign rice like it had promised. And if you were a U.S. farmer hoping to sell some of your rice crop to China, things just were not moving.

GLAUBER: China just wasn't importing rice.

GARCIA: At least, not from the United States. China was importing a tiny bit of rice from other countries. So what do you do if you are the United States? Well, you do the same thing that a lot of parties with a grievance do. You litigate at the WTO.

GLAUBER: The U.S., actually, during the last couple of months of the Obama administration took China to the WTO to the settlement body and said, hey, China's not playing by the rules. They're not importing rice.

HERSHIPS: The World Trade Organization has its own kind of court, the Dispute Settlement Body. It lets countries which are upset with other countries about tariffs and import licenses try to work things out.

GARCIA: The case took three years to work out, which, as these things go, is actually pretty quick. But it did eventually get settled. The WTO said that China had to allow the sale, and China agreed to let it go through.

HERSHIPS: And even though the Chinese government may have been a reluctant purchaser of American rice, there are many consumers in China who might want the option to buy rice from America.

GARCIA: So the Chinese finally agreed to start importing more foreign rice, and it placed an order for American rice.

HERSHIPS: And that is the speed of international trade, Cardiff. Some of these deals can take a really long time to cook up.

GARCIA: Cardiff Garcia.

HERSHIPS: Sally Herships.

GARCIA: NPR News. Transcript provided by NPR, Copyright NPR.


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