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

BOX 6.2 Wheat
<strong>India</strong> has imported several million tons <strong>of</strong> wheat in recent years because <strong>of</strong> weather-related production shortfalls,
despite the fact that normally it is able to achieve its overall food security goal <strong>of</strong> having the capability to produce
enough wheat to satisfy its domestic requirements. Even with the market dem<strong>and</strong> for U.S. wheat, however, no
U.S. shipments have been able to overcome the nontariff measures that have effectively foreclosed one <strong>of</strong> the
world’s largest wheat markets to U.S. producers.
Although <strong>India</strong>n wheat production fluctuates annually because <strong>of</strong> its variable water supply <strong>and</strong> government
support programs that have created cyclical, distorting production incentives, <strong>India</strong> has largely satisfied its
domestic dem<strong>and</strong> in recent years. It has also been a major exporter since 2000, although its exports declined
sharply in 2006–08 because <strong>of</strong> higher global prices that led to stronger government efforts to maintain domestic
supplies. To retain stocks for distribution to the poor, as well as to adjust for storage waste, <strong>India</strong> imported wheat
each year during 2006–08, primarily from Russia, Argentina, <strong>and</strong> Canada. <strong>India</strong>n food processors that expressed
an interest in importing high-quality U.S. wheat a indicated that they were prevented from doing so by <strong>India</strong>n tariffs
<strong>and</strong> certain long-st<strong>and</strong>ing phytosanitary issues. b
For <strong>India</strong>n private sector importers <strong>of</strong> wheat, the applied tariff rate is 50 percent; but for <strong>India</strong>n state trading
enterprises, through which most wheat is imported, the applied rate is zero. The private sector applied rate is the
primary tariff tool used by the <strong>India</strong>n government to manage domestic stocks; that rate dropped from 50 percent
to 5 percent to zero within three months in 2006 to encourage private sector imports.
Although tariffs on wheat vary with market conditions, the most vexing problem facing U.S. wheat producers is the
<strong>India</strong>n phytosanitary st<strong>and</strong>ard for the presence <strong>of</strong> weed seed in wheat shipments, which has effectively banned
sales <strong>of</strong> U.S. wheat in <strong>India</strong>. The <strong>India</strong>n government m<strong>and</strong>ates that levels <strong>of</strong> weed seed, a contaminant reportedly
present in practically all wheat shipments worldwide, not exceed a very low threshold (1 seed per 2 kilograms, or
effectively zero) <strong>and</strong> that the seller’s government provide certification to that effect. The U.S. government
maintains that because the wheat is imported for consumption, not planting, the plant health risk posed by weed
seed is low <strong>and</strong> the st<strong>and</strong>ard is unreasonable. c
As a matter <strong>of</strong> course, U.S. wheat producers “clean” their wheat to remove a number <strong>of</strong> contaminants <strong>and</strong> may
unknowingly remove enough weed seed during this process to satisfy <strong>India</strong>n requirements in any single shipment,
but they cannot reliably <strong>and</strong> consistently meet the <strong>India</strong>n st<strong>and</strong>ard as a practical matter. The Animal <strong>and</strong> Plant
Health Inspection Service (APHIS) <strong>of</strong> the U.S. Department <strong>of</strong> Agriculture only provides certification that a
contaminant is not present when the pest does not exist in the United States or a treatment precludes the
possibility <strong>of</strong> a pest, because sampling <strong>and</strong> testing margins <strong>of</strong> error will always be greater than zero. Neither
scenario applies to all <strong>of</strong> the weed seeds for which <strong>India</strong> has quarantine requirements. d Therefore, APHIS cannot
certify that U.S. wheat shipments meet the very low <strong>India</strong>n threshold, <strong>and</strong> consequently, U.S. wheat shipments to
<strong>India</strong> are almost nonexistent.
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a The high protein content, relative to the majority <strong>of</strong> <strong>India</strong>n wheat production, is one <strong>of</strong> the most attractive
features <strong>of</strong> U.S. wheat. Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 8, 2009;
industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 11, 2009.
b Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 6, 2009; industry
representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 8, 2009; <strong>and</strong> industry representative,
interview by Commission staff, New Delhi, <strong>India</strong>, June 2, 2009.
c All other purchasers <strong>of</strong> U.S. wheat reportedly also recognize the risk as low. Government <strong>of</strong>ficial, e-mail
message to Commission staff, September 22, 2009.
d Ibid.
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