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

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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. ______________ 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. 6-6
BOX 6.2 Wheat—Continued Yet, <strong>India</strong> imports wheat from other sources that likely also have weed seed in their shipments but that certify these shipments as meeting <strong>India</strong>n contaminant thresholds. Because <strong>India</strong> reportedly cannot test for the presence <strong>of</strong> weed seed in shipments after arrival at the port <strong>and</strong> has only a limited ability to test <strong>of</strong>fsite, acceptance <strong>of</strong> these wheat imports is dependent on the certifications by the origin country. e Questions are routinely raised by U.S. private sector <strong>and</strong> government <strong>of</strong>ficials regarding the ability <strong>of</strong> <strong>India</strong>’s foreign wheat suppliers, especially Russia <strong>and</strong> Ukraine, to provide this certification. Furthermore, although the U.S. government has made concerted attempts to engage the <strong>India</strong>n government on the continued effectiveness <strong>of</strong> the weed seed st<strong>and</strong>ard, most recently in 2007, no progress has been made. f The <strong>India</strong>n government eases weed seed tolerances <strong>and</strong> other phytosanitary st<strong>and</strong>ards when it decides more wheat supplies are necessary for the <strong>India</strong>n market. g For example, another <strong>India</strong>n st<strong>and</strong>ard for wheat imports involves a tolerance for ergot (a fungus) that is nominally zero, meaning completely free from ergot. <strong>India</strong> relaxed those st<strong>and</strong>ards for a short period in 2007 when policymakers determined that the <strong>India</strong>n market was experiencing a wheat shortage. h ______________ e Tracy, written testimony to the USITC, April 22, 2009. f Ibid. g Government <strong>of</strong>ficial, interview by Commission staff, New Delhi, <strong>India</strong>, June 2, 2009. h Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009; industry representative, interview by Commission staff, Gurgaon, <strong>India</strong>, June 5, 2009. the disease already exists in <strong>India</strong>. 13 Similarly, <strong>India</strong> recently issued proposals for maximum acceptable residue levels in carbonated beverages that U.S. producers state exceed international norms <strong>and</strong> are not justified by scientific st<strong>and</strong>ards. 14 Rules for Genetically Modified Organisms Other than a st<strong>and</strong>ing exception for soybean oil, <strong>India</strong>n rules prohibit importation <strong>of</strong> any product containing GMOs (e.g., U.S. corn or certain processed foods) without prior <strong>India</strong>n regulatory approval (box 6.3). 15 The approval must be obtained from the Genetic Engineering Approval Committee (GEAC), an <strong>India</strong>n administrative authority that industry sources regard as underresourced <strong>and</strong> not fully capable <strong>of</strong> exercising its oversight functions, such as testing <strong>and</strong> trials <strong>of</strong> new products. 16 The GEAC is at the center <strong>of</strong> a GMO approval process that can involve four <strong>India</strong>n ministries <strong>and</strong> result in serial delays, even for products containing GMOs undergoing testing for cultivation in <strong>India</strong>. 17 As a result, import bans on U.S. agricultural products containing GMOs are 13 Government <strong>of</strong>ficials, interview by Commission staff, Washington, DC, March 5, 2009. 14 Rochette, International Council <strong>of</strong> Grocery Manufacturer Associations (ICGMA), to Dr. Chattapadhya, Ministry <strong>of</strong> Health, Government <strong>of</strong> <strong>India</strong>, September 30, 2008. The final version <strong>of</strong> these regulations containing tolerance limits were issued on June 17, 2009; became effective that same day; <strong>and</strong> had not been notified to the WTO as <strong>of</strong> a week later. Dhankhar, “GOI Amends PFA Rules Relating to Carbonated Water,” June 30, 2009. 15 Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009; Singh, <strong>India</strong>: Agricultural Biotechnology, July 24, 2009; Hindu Business Line, “Bt Brinjal: No Outst<strong>and</strong>ing Bio-safety Issues,” July 17, 2009; <strong>and</strong> Das, “ICAR Body to Study Socio Economic Impact <strong>of</strong> BT Brinjal,” August 13, 2009. 16 Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 11, 2009; industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 12, 2009. 17 Singh, <strong>India</strong>: Agricultural Biotechnology, 2009 July 24, 2009; Hindu Business Line, “Bt Brinjal: No Outst<strong>and</strong>ing Bio-safety Issues,” July 17, 2009; <strong>and</strong> Das, “ICAR Body to Study Socio Economic Impact <strong>of</strong> BT Brinjal,” August 13, 2009. 6-7
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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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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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TABLE 3.2 India: P
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more likely to have been exposed to
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BOX 3.3 Indian Con
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TABLE 3.3 India: T
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are expected to see income growth <
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Food Preferences India</str
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Regional Variation Geographic <stro
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CCC. “Know India
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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 97 and 98: CHAPTER 5 TARIFFS Overview
Page 99 and 100: sensitive. They include vegetable f
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Page 105 and 106: India also reporte
Page 107 and 108: Reference Prices Reference prices,
Page 109 and 110: Landing Fees <stro
Page 111 and 112: Simulated Effects
Page 113 and 114: and nuts” by $0.
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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: BOX 6.1 Milk and M
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
Page 148 and 149: TABLE 7.1 India: C
Page 150 and 151: First Point of Sal
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Page 154 and 155: approximately 65 million households
Page 156 and 157: 7-10 TABLE 7.2 India</stron
Page 158 and 159: poor communications infrastructure
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Page 164 and 165: found that 39 percent of</s
Page 166 and 167: Bibliography Banerjee, A. Dairying
Page 168 and 169: Tiwari, Shri Rajendra Kumar. “Pos
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Page 172 and 173: TABLE 8.2 India: A
Page 174 and 175: 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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