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

BOX 6.3 Corn
The <strong>India</strong>n government’s focus on self-sufficiency in corn production has left few market opportunities open for U.S.
corn exports, even when U.S. <strong>and</strong> <strong>India</strong>n corn prices are competitive. a Those opportunities that do exist for foreign
corn in the <strong>India</strong>n market are constrained primarily by nontariff uncertainties that hinder U.S. corn producers in
particular.
On a relative <strong>and</strong> an absolute basis, <strong>India</strong>n import dem<strong>and</strong> for corn has been modest since 1999, although import
levels have been climbing since reaching their nadir in 2003. <strong>India</strong> essentially produces all the corn it consumes <strong>and</strong>
had a small amount <strong>of</strong> exports (less than $1 million) in 2008. Approximately two-thirds <strong>of</strong> <strong>India</strong>n corn production is
consumed as animal (primarily poultry) feed. Increased domestic corn production has kept pace with increased
domestic poultry production, <strong>and</strong> as a result, dem<strong>and</strong> for corn imports has not increased. b <strong>India</strong>’s corn imports were
valued at only $2.4 million in 2007 <strong>and</strong> $3.7 million in 2008 despite increased corn prices worldwide in 2007 <strong>and</strong>
2008. Approximately 80–90 percent <strong>of</strong> this amount originated in Argentina, <strong>and</strong> the remainder came from the United
States. c
U.S. <strong>and</strong> Argentine corn exports face the same tariff-rate quota (TRQ) rates <strong>of</strong> 15 percent in-quota <strong>and</strong> 50 percent
over-quota, but when <strong>India</strong> lowers its tariff rates to encourage imports, U.S. corn producers cannot take advantage <strong>of</strong>
the change principally because <strong>of</strong> restrictions on importation <strong>of</strong> agricultural products containing genetically modified
organisms (GMOs). For example, in February 2007, the <strong>India</strong>n government abolished its corn TRQ <strong>and</strong> lowered the
duty to free for 11 months, but imports <strong>of</strong> U.S. corn did not rise significantly. d
The most important <strong>India</strong>n trade measure affecting U.S. corn exports is the restriction on agricultural imports
containing GMOs. <strong>India</strong> has not approved for import <strong>and</strong> will not knowingly import corn containing GMOs. Growers in
Argentina <strong>and</strong> the United States have cultivated one variety <strong>of</strong> GMO corn, Bt corn, at least since the late 1990s. e
<strong>India</strong> requires GMO-free certifications for its corn imports, which the Argentine government provides but the U.S.
government does not. f U.S. growers can supply non-GMO corn, but growing <strong>and</strong> channeling the corn separately adds
significantly to the cost, a process that should prevent any supplier <strong>of</strong> truly GMO-free corn from being price
competitive in the <strong>India</strong>n market. g Furthermore, the complexity <strong>of</strong> <strong>India</strong>’s GMO approval process, the lack <strong>of</strong>
specificity <strong>and</strong> transparency in <strong>India</strong>n GMO regulations <strong>and</strong> procedures, <strong>and</strong> overlapping <strong>India</strong>n agency jurisdictions
for GMO import administration all serve to block possible increases in U.S. corn exports. h
Certain specific <strong>India</strong>n consumption factors indicate an increased dem<strong>and</strong> for corn in the future, but U.S. corn export
opportunities may remain limited. For example, a U.S. quick-service restaurant chain that features corn products is
intending to exp<strong>and</strong> its presence in <strong>India</strong> <strong>and</strong> will require increased corn imports because the <strong>India</strong>n supply will likely
be insufficient. However, these imports are projected to come from the EU because U.S. corn exports contain
varieties with unapproved GMOs. i Similarly, although consumption <strong>of</strong> processed food products containing corn is
expected to rise over the next few years, <strong>India</strong>ns may hesitate to import U.S. corn to use in making these products,
even if import approval is granted, because st<strong>and</strong>ard U.S. yellow corn is not as orange in color as <strong>India</strong>n corn.
According to one U.S. agricultural products company operating in <strong>India</strong>, use <strong>of</strong> U.S. corn would change the
appearance <strong>of</strong> <strong>India</strong>n processed food products to a great degree. j
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a Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009.
b Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 28, 2009.
c <strong>India</strong>n industry representatives stated that U.S. corn has a higher moisture content than domestic <strong>and</strong> Argentine
corn, which may make it less suitable for <strong>India</strong>n consumption. Industry representative, interview by Commission staff,
Mumbai, <strong>India</strong>, May 28, 2009, <strong>and</strong> industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 29,
2009. A U.S. industry source indicated that the moisture level issue can be addressed by the U.S. corn exporter.
Industry representative, e-mail message to Commission staff, July 23, 2009.
d <strong>India</strong>n imports <strong>of</strong> U.S. corn were approximately $376,000 in 2007 <strong>and</strong> $364,000 in 2008. GTIS, World Trade
Atlas Database (accessed November 3, 2009). Because <strong>of</strong> the low value, industry sources declined to speculate on
the composition <strong>of</strong> these corn shipments. Industry representatives, telephone interview by Commission staff,
September 9, 2009.
e Robertson, “Biotechnology: Information on Prices <strong>of</strong> Genetically Modified Seeds in the United States <strong>and</strong>
Argentina,” June 29, 2000, 2.
f
Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 8, 2009. See box 6.2.
g Industry representatives, telephone interview by Commission staff, September 9, 2009.
h NCGA, written submission to the USITC, June 19, 2009.
i Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 8, 2009.
j Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 11, 2009.
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