India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

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Tariff Variability the lower return on each transaction. 24 For example, according to an industry representative, <strong>India</strong> cut the tariff rate on almonds in half in 2001; by 2006, <strong>India</strong>’s revenues from the tariff on almonds had increased by 71 percent over prior levels. 25 The difference between high <strong>India</strong>n average bound tariff rates <strong>and</strong> lower average applied tariff rates for agricultural products allows the government to raise applied tariffs on most agricultural products without violating its WTO commitments (fig. 5.1). The <strong>India</strong>n government has used this authority to modify rates on certain agricultural products frequently, especially for staple food products. Industry sources claim that tariff-rate variability is an impediment for U.S. agricultural exports because frequently changing tariff rates create uncertainty, making negotiating future sales <strong>and</strong> determining financial plans difficult. 26 FIGURE 5.1 <strong>India</strong>: Average applied <strong>and</strong> bound tariff rates by selected product groups, 2009 250 200 150 Tariff rates (%) 100 50 0 Animal prod Hides & skins Dairy products Processed fruits & veg Fruits, veg, & nuts C<strong>of</strong>fee, tea, spices Cereals Certain cereal prod Misc. veg. extracts Oilseeds Fats & oils Sugars & conf. Beverages Average applied tariff rates Average bound tariff rates Source: Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance, Central Board <strong>of</strong> Excise <strong>and</strong> Customs, Customs Tariff 2008/09 ; Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance, Central Board <strong>of</strong> Excise <strong>and</strong> Customs, various Notifications <strong>of</strong> Customs . 24 Industry representative, interview by Commission staff, Washington, DC, March 3, 2009; industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, June 1, 2009. 25 USITC, hearing transcript, April 21, 2009, 33 (testimony <strong>of</strong> Mark Masten, Cal-Pure Pistachios, Inc.). 26 Industry representative, telephone interview by Commission staff, April 14, 2009; industry representative, telephone interview by Commission staff, June 25, 2009. 5-6
The <strong>India</strong>n government views the ability to adjust tariff rates as a necessary trade instrument, as long as the system is WTO compatible. 27 The rationale for adjusting tariff rates is to protect farmers <strong>and</strong> maintain domestic price stability when domestic production <strong>and</strong> international prices fluctuate. The <strong>India</strong>n government strives to balance competing interests <strong>of</strong> producers <strong>and</strong> consumers by adjusting tariff rates in reaction to market conditions, typically lowering them when domestic prices are rising <strong>and</strong> domestic production cannot meet domestic dem<strong>and</strong>. Conversely, the <strong>India</strong>n government <strong>of</strong>ten increases tariff rates when international market prices are falling <strong>and</strong> there is a surplus in domestic production or government buffer stocks, decreasing the country’s need for imports. 28 In addition to government-directed changes, domestic industry associations can petition the Ministry <strong>of</strong> Finance to lower tariffs. In response, the Ministry <strong>of</strong> Finance will determine the reduction’s impact on the budget before lowering tariff rates. 29 Concerns about the impact <strong>of</strong> tariff-rate adjustments on government revenue are generally secondary to their impact on producers <strong>and</strong> consumers. 30 The history <strong>of</strong> <strong>India</strong>n applied tariff rates for certain products, especially food staples, illustrates the frequent variability that occurs. Between 2005 <strong>and</strong> 2008, production shortfalls <strong>and</strong> rising international prices caused <strong>India</strong>n domestic food prices to rise sharply. To minimize the burden on consumers, <strong>India</strong> decreased tariff rates on many staple food products. As prices declined, however, tariff rates generally were returned to their previous levels to support <strong>India</strong>n farm prices (figs. 5.2 <strong>and</strong> 5.3). This is shown by recent changes in applied tariff rates for wheat, rice, pulses, <strong>and</strong> vegetable oils: Wheat: The tariff rate on wheat was lowered as poor harvests caused domestic prices to increase. The rate was lowered from 50 percent to 5 percent in June 2006 before being reduced to zero in September 2006. As a result, <strong>India</strong> imported wheat in 2006 for the first time since 2001. 31 As domestic production increased <strong>and</strong> prices declined, <strong>India</strong> returned the rate to 50 percent on January 1, 2009. Rice: Concerns about the rising price <strong>of</strong> rice caused <strong>India</strong> to lower the tariff rate on rice from 70 percent to zero in March 2008. When market prices stabilized in March 2009, the tariff rate was returned to 70 percent. 32 Pulses: The wholesale price index for pulses rose by 45.6 percent between 2003 <strong>and</strong> 2006. 33 As a result, on June 8, 2006, the <strong>India</strong>n government exempted pulses from the applicable 10 percent import duty in order to control prices. The duty exemption has been extended until March 31, 2010. 34 Vegetable oils: In order to support farm prices, <strong>India</strong> raised tariff rates in early 2005 on crude palm oil from 65 percent to 80 percent <strong>and</strong> on refined palm oil from 70 percent to 90 percent. In early 2007, edible oil prices began rising quickly because <strong>of</strong> lower domestic production, which led the government to reduce rates three times during 2007 on both crude <strong>and</strong> refined palm oils, before reducing the tariff rates on 27 Government <strong>of</strong> <strong>India</strong>, “High-level Committee Report.” 28 Government <strong>of</strong> <strong>India</strong>, Planning Commission, Eleventh Five Year Plan 2007–12, vol. 3, 2008, 15. 29 Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 28, 2009. 30 Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009. 31 Govindan, <strong>India</strong>: Grain <strong>and</strong> Feed, February 20, 2009, 8. 32 <strong>India</strong>n Express.com, “Government Allows Duty-Free Rice Imports,” March 21, 2008. 33 Aradhey, <strong>India</strong>: Grain <strong>and</strong> Feed, December 14, 2007, 5. 34 Govindan, <strong>India</strong>: Grain <strong>and</strong> Feed, May 6, 2008, 5; Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance, Central Board <strong>of</strong> Excise <strong>and</strong> Customs, Notification No. 28/2009-Customs, March 26, 2009. 5-7
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United States International Trade C
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U.S. International Trade Commission
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Abstract This report describes <str
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TABLE ES.1 India:
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U.S. agricultural products face str
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U.S. Foreign Direct Investment U.S.
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CONTENTS Page Abstract ............
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CONTENTS―Continued Chapter 6 <str
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CONTENTS―Continued Figures 1.1. <
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ACRONYMS AND TERMS AAY Antodaya Ann
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ACRONYMS AND TERMS—Continued RGGV
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TABLE 1.1 India: A
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FIGURE 1.1 India:
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India’s central
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Despite their weak economic pr<stro
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Approach Current India</str
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Bibliography Birner, Regina, Surupt
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World Bank. Agriculture for Develop
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FIGURE 2.1 India:
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TABLE 2.1 India: A
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FIGURE 2.3 India:
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premium); (2) India</strong
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include government export restricti
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TABLE 2.3 India: A
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Page 54 and 55: Exports by Major Trading Partner <s
Page 57 and 58: CHAPTER 3 Domestic Consumption Over
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Page 61 and 62: more likely to have been exposed to
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Page 67 and 68: are expected to see income growth <
Page 69 and 70: Food Preferences India</str
Page 71 and 72: Regional Variation Geographic <stro
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Page 83 and 84: BOX 4.1 The Central Government’s
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Page 89 and 90: known as zamindars, have doubled or
Page 91 and 92: that the PFA Act was strictly enfor
Page 93 and 94: ———. Bharat Nirman: A Time-Bo
Page 95 and 96: Organisation for Economic Co-operat
Page 97 and 98: CHAPTER 5 TARIFFS Overview
Page 99 and 100: sensitive. They include vegetable f
Page 101: wholly milled rice and</str
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Page 107 and 108: Reference Prices Reference prices,
Page 109 and 110: Landing Fees <stro
Page 111 and 112: Simulated Effects
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Page 117 and 118: Bibliography Acharya, Keya. “Thor
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Page 121 and 122: CHAPTER 6 Nontariff</strong
Page 123 and 124: foreign sources. 6 For example, SPS
Page 125 and 126: BOX 6.1 Milk and M
Page 127 and 128: BOX 6.2 Wheat—Continued Yet, <str
Page 129 and 130: perpetuated continuously. The impor
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Page 133 and 134: import corn under the TRQ is too bu
Page 135 and 136: Customs Procedures India</s
Page 137 and 138: Corruption Interests within <strong
Page 139 and 140: TABLE 6.2 India: E
Page 141 and 142: Bibliography American Apparel <stro
Page 143 and 144: Mattson, Jeremy W., Won, W. Koo, <s
Page 145: ———. 2009 National Trade Esti
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Private mandis Som
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approximately 65 million households
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7-10 TABLE 7.2 India</stron
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poor communications infrastructure
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limited popularity with farmers bec
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The lack of infras
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found that 39 percent of</s
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Bibliography Banerjee, A. Dairying
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Tiwari, Shri Rajendra Kumar. “Pos
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FDI Regulations and</strong
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TABLE 8.2 India: A
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Food Processing and</strong
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There is not necessarily a strong l
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For processing of
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BOX 8.3 Restrictions on Foreign Joi
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Under certain circumstances, FDI ca
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commenced. States tend to be quick
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Bibliography Bahn, Niti, an
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International Center for Alcohol Po
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Structure of the <
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BOX 9.1 The UPOV System for Plant V
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that the public sector in I
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Whether this situation will soon ch
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The U.S.-India Bus
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eggplant, which began field trials
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Maskus, Keith E. “Intellectual Pr
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APPENDIX A REQUEST LETTER
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The Honorable Sham L. Arano
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cprice-sewell on PRODPC61 with NOTI
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APPENDIX C HEARING WITNESSES
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ORGANIZATION AND WITNESS: Tuttle Ta
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Summary of Views <
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advertising and pr
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highest in the Asia-Pacific region.
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to U.S. exports to India</s
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transparent sanitary regulations th
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hotel and catering
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Western Pistachio Association 26 In
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APPENDIX E POTENTIAL FOR U.S. AGRIC
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E-4 TABLE E.1 India</strong
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APPENDIX F INDIAN AGRICULTURAL PROD
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TABLE F.1 India: A
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FIGURE F.1 India:
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is in nonirrigated areas with yield
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Consumption India
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efrigeration. This characteristic i
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70 percent of tota
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eportedly preferred in southern <st
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Cotton During MY 2003/04-2007/08, <
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Government of <str
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APPENDIX G UNION AND STATE/UNION TE
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certain agricultural goods in the p
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Bibliography Chaulan, Shri U.K. “
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Simulation Framework The effects <s
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Producers determine the optimal sup
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Applied ad valorem tariff equivalen
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We considered the possibility that
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Estimation of <str
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Bibliography Anderson, Kym, Mariann
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