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

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Free Trade Agreements <strong>India</strong> provides tariff preferences to selected countries through regional <strong>and</strong> bilateral free trade <strong>and</strong> other agreements, but the impact <strong>of</strong> these agreements on agricultural trade appears to be limited. With the exception <strong>of</strong> the benefits that <strong>India</strong> extends to Sri Lanka under their FTA <strong>and</strong> to the least-developed-country participants in the South Asian Free Trade Agreement (SAFTA), 70 the number <strong>of</strong> agricultural products receiving preferences is low. In addition, the preferences themselves are not significant, only marginally reducing <strong>India</strong>’s average applied tariff rates on agricultural products below the average most-favored-nation (MFN) applied rates on such products. 71 The agreements currently in force are SAFTA <strong>and</strong> the Asia-Pacific Trade Agreement (APTA), FTAs with Sri Lanka <strong>and</strong> Singapore, <strong>and</strong> preferential trade agreements (PTAs) with Chile, Bhutan, <strong>and</strong> the Common Market <strong>of</strong> the South (Mercosur). <strong>India</strong> has also signed an economic partnership agreement with the Republic <strong>of</strong> Korea, which is not yet in force. <strong>India</strong> provides preferences that cover a limited number <strong>of</strong> agricultural products 72 <strong>and</strong> <strong>of</strong>fer minimal tariff-rate reductions 73 in its agreements with Chile, Singapore, 74 <strong>and</strong> Mercosur, 75 as well as in APTA <strong>and</strong> SAFTA. 76 The preferences in these agreements are concentrated primarily in meats, preparations <strong>of</strong> meat, hides <strong>and</strong> skins, <strong>and</strong> miscellaneous edible preparations. Owing to the restricted nature <strong>of</strong> these concessions, the impact on <strong>India</strong>n agricultural imports is limited. For example, since 2005 when the <strong>India</strong>-Singapore FTA entered into force, total <strong>India</strong>n agricultural imports from Singapore grew by about $17 million, but agricultural products covered in the FTA accounted for only $3 million <strong>of</strong> that growth. 77 <strong>India</strong> does provide more substantial tariff-rate reductions on agricultural products in its FTA with Sri Lanka, which covers 92.5 percent <strong>of</strong> agricultural tariff lines. 78 As a result, the average tariff rate on <strong>India</strong>n agricultural imports from Sri Lanka is 7.6 percent, compared to the MFN average rate <strong>of</strong> 34.4 percent in 2007. 79 Since 2003, when the majority <strong>of</strong> Sri Lankan products were given duty-free access, Sri Lankan agricultural exports to <strong>India</strong> have increased significantly, especially cloves <strong>and</strong> certain vegetable fats <strong>and</strong> oils. 80 70 The least-developed-country members <strong>of</strong> SAFTA are Bangladesh, Bhutan, Maldives, <strong>and</strong> Nepal. 71 WTO, <strong>India</strong> Trade Policy Review, July 24, 2007, 104. 72 For example, the APTA covers only 8.4 percent <strong>of</strong> agricultural tariff lines. WTO, <strong>India</strong> Trade Policy Revie, July 24, 2007, 104 73 For example, in the Chile FTA, the MFN rate was reduced only 15–20 percent. Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Finance, Central Board <strong>of</strong> Excise <strong>and</strong> Customs, Customs Tariff Notification No. 101/2007- Customs, September 11, 2007, 1. 74 The FTA with Singapore provides phased concessions or tariff eliminations. 75 RTTNews, “<strong>India</strong>-Mercosur Trade to Touch $10 Bln. in 5-years,” June 4, 2009. 76 <strong>India</strong> provides greater tariff preferences to the least developed countries <strong>of</strong> the SAFTA agreement; the average applied rates on agricultural products from those countries are lower than similar provisions in other FTAs. 77 GTIS, World Trade Atlas Database (accessed September 17, 2009). 78 Approximately one-third <strong>of</strong> the total tariff lines were granted duty-free access to the <strong>India</strong>n market in 2000, <strong>and</strong> the remaining two-thirds, with a few exceptions, were granted duty-free access in 2003. 79 WTO, <strong>India</strong> Trade Policy Review, July 24, 2007, 104. 80 Sri Lankan exports <strong>of</strong> certain vegetable fats <strong>and</strong> oils <strong>and</strong> cloves increased from $0 <strong>and</strong> $3.7 million, respectively, in 2003 to $33.8 million <strong>and</strong> $31.1 million, respectively, in 2008. GTIS, World Trade Atlas Database (accessed June 16, 2009). 5-14
Simulated <strong>Effects</strong> <strong>of</strong> <strong>India</strong>n Food <strong>and</strong> Agricultural Applied <strong>Tariffs</strong> Model simulations prepared by Commission staff suggest that <strong>India</strong>n agricultural tariffs reduced U.S. agricultural exports to <strong>India</strong> in 2007 by $200–291 million; in the absence <strong>of</strong> <strong>India</strong>n tariffs, U.S. agricultural exports to <strong>India</strong> would have been 42–61 percent higher in 2007. 81 Among U.S. products most affected by <strong>India</strong>n agricultural tariffs were almonds (U.S. exports to <strong>India</strong> were reduced by $26.9–32.7 million), fresh apples ($16.6– 21.2 million), soybean oil ($17.1–21.7 million), cotton ($3.0–26.4 million), <strong>and</strong> certain vegetable fats <strong>and</strong> oils ($17.8–27.2 million). The simulation results suggest that <strong>India</strong>n agricultural imports from all countries would have exp<strong>and</strong>ed from $7.51 billion in 2007 to $10.7–11.3 billion in the absence <strong>of</strong> <strong>India</strong>n tariffs in 2007. Because <strong>India</strong> applies the same tariff rates on imports from the United States as on imports from other countries, the U.S. share <strong>of</strong> those imports would have exp<strong>and</strong>ed from 6.36 percent in 2007 to 6.37–6.81 percent in the absence <strong>of</strong> <strong>India</strong>n tariffs. The simulated tariff effects were obtained from model simulations <strong>of</strong> the absence <strong>of</strong> <strong>India</strong>n applied tariffs on agricultural imports from all countries. The simulations are based on 2007 statistics. 82 The simulations were performed with an interrelated framework that links a partial equilibrium trade model, specified at the six-digit level <strong>of</strong> the Harmonized System (HS6), to an economy-wide trade model, the Global Trade Analysis Project (GTAP) model. The simulation framework is described in appendix H. The simulated tariff effects are the marginal effects <strong>of</strong> applied <strong>India</strong>n tariffs <strong>and</strong> do not incorporate any other effects. In the absence <strong>of</strong> <strong>India</strong>n tariffs <strong>and</strong> in the span <strong>of</strong> a few years, U.S. exports could exp<strong>and</strong> by more than indicated here because <strong>of</strong> possible additional effects <strong>of</strong> economic growth in <strong>India</strong> <strong>and</strong> the results <strong>of</strong> market development by U.S. exporters. 83 The tariff simulations focus on applied tariffs <strong>and</strong> do not consider other policies that reduce dem<strong>and</strong> for U.S. products in <strong>India</strong>. 84 The quantitative effects <strong>of</strong> certain <strong>India</strong>n nontariff measures <strong>and</strong> domestic subsidies are discussed in chapter 6. 81 A range <strong>of</strong> simulated effects was obtained by varying the magnitude <strong>of</strong> trade elasticities to account for the degree <strong>of</strong> statistical uncertainty in the econometric estimates <strong>of</strong> the elasticities. See appendix H. 82 <strong>India</strong>n applied tariff rates for staples fluctuate from year to year. Thus the simulated effects for 2007 could be different than effects for other years. 83 These macroeconomic factors are considered in estimates provided by U.S. tree nut industry representatives. Blue Diamond Growers estimated that, using 2009 duty rates, the <strong>India</strong>n market has the capacity to grow substantially, such that U.S. almond exports to <strong>India</strong> in the next few years could rise to $350–400 million. Also, U.S. industry representatives indicated that, absent the tariff, total <strong>India</strong>n annual consumption <strong>of</strong> pistachios could exp<strong>and</strong> from the 17 million pounds recorded in 2007 to an estimated 115– 165 million pounds <strong>and</strong> that, at the current U.S. market share in <strong>India</strong> <strong>of</strong> 8 percent, U.S. exports to <strong>India</strong> could reach a value <strong>of</strong> $30–45 million. Blue Diamond Growers, written submission to the Commission, March 24, 2009; industry representatives, interview by Commission staff, Washington, DC, March 3, 2009. 84 Additional <strong>India</strong>n border fees <strong>and</strong> taxes discussed in this chapter are not considered in the tariff simulations. The additional duty is levied on imported <strong>and</strong> domestic products, <strong>and</strong> a simulation would not show significant effects for U.S. exports. The special additional duty <strong>and</strong> the educational cess surcharge are not considered in the tariff simulations because products are <strong>of</strong>ten exempted from them <strong>and</strong> because a definite list <strong>of</strong> those products cannot be assembled. The exceptions seem to have been provided when domestic prices were high. It is not clear, however, that the exemptions were given because <strong>of</strong> prices. 5-15
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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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FIGURE 2.6 India:
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Exports by Major Trading Partner <s
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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 79 and 80: The Farm Sector soybeans 29 —but
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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
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Page 99 and 100: sensitive. They include vegetable f
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Page 117 and 118: Bibliography Acharya, Keya. “Thor
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Page 123 and 124: foreign sources. 6 For example, SPS
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Page 129 and 130: perpetuated continuously. The impor
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Page 133 and 134: import corn under the TRQ is too bu
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Page 137 and 138: Corruption Interests within <strong
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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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Page 150 and 151: First Point of Sal
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Page 154 and 155: approximately 65 million households
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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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