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

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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 ______________ 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. 6-8
perpetuated continuously. The import ban st<strong>and</strong>s in contrast to the range <strong>of</strong> responses by the <strong>India</strong>n market regarding the sale <strong>of</strong> products containing GMOs, from some support at the retail level to some resistance within the <strong>India</strong>n domestic supply chain <strong>and</strong> from nongovernmental organizations. 18 Fumigation Requirements For certain agricultural products, <strong>India</strong> requires designated fumigation treatments that can be administratively difficult or prohibited for U.S. producers to implement, <strong>and</strong> it has resisted allowing other scientifically justified treatments to be used. For example, the <strong>India</strong>n government has allowed U.S. pulses to be imported under a short-term exception to <strong>India</strong>n requirements for fumigation treatment <strong>of</strong> U.S. shipments with methyl bromide prior to export. 19 Methyl bromide treatment is not available in the United States to U.S. pulses producers, who have proposed that the treatment be completed following arrival in <strong>India</strong>, which is occurring now, or that the treatment requirement be ended because it is unnecessary. 20 The exception is renewed at six-month intervals, creating uncertainty for U.S. exporters. 21 Similarly, U.S. shipments <strong>of</strong> sweet cherries to <strong>India</strong> are not commercially viable because methyl bromide fumigation would reduce quality <strong>and</strong> shelf life. The U.S. horticultural industry states generally that a nonfumigation systems approach would obviate the need for fumigation. 22 Quality St<strong>and</strong>ards Dem<strong>and</strong>s by the <strong>India</strong>n government for the highest possible quality <strong>of</strong> certain agricultural imports effectively bar their importation into <strong>India</strong>, despite the acceptance <strong>of</strong> lesserquality goods throughout the global trading system. For example, in the recent past, the <strong>India</strong>n government issued import st<strong>and</strong>ards for hides <strong>and</strong> skins that producers could not meet because <strong>of</strong> the government’s requirement for perfectly unblemished imports; the st<strong>and</strong>ards were subsequently relaxed in 2009, <strong>and</strong> there has been a report that trade has improved. 23 The <strong>India</strong>n government has placed quality requirements on imports <strong>of</strong> bovine semen that would exclude most <strong>of</strong> the product that is traded worldwide. 24 18 Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 11, 2009; industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, May 26, 2009; <strong>and</strong> industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009. 19 Industry representative, interview by Commission staff, New Delhi, <strong>India</strong>, June 4, 2009; USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 239; <strong>and</strong> Aradhey, <strong>India</strong>: Grain <strong>and</strong> Feed; Pulse Situation <strong>and</strong> Outlook, December 14, 2007, 7. 20 Government <strong>of</strong>ficial, interview by Commission staff, New Delhi, <strong>India</strong>, May 26, 2009; industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 28, 2009. Fumigation with methyl bromide continues to occur legally for very select agricultural purposes in the United States because <strong>of</strong> ozone depletion concerns. See U.S. Environmental Protection Agency, “The Phaseout <strong>of</strong> Methyl Bromide,” August 3, 2009. 21 Govindan, <strong>India</strong>: Grain <strong>and</strong> Feed, February 20, 2008, 20; Govindan, <strong>India</strong>: Grain <strong>and</strong> Feed, February 20, 2009, 21. 22 NHC, written submission to the USITC, June 24, 2009. 23 Government <strong>of</strong>ficial, interview by Commission staff, New Delhi, <strong>India</strong>, May 26, 2009; industry representative, e-mail message to Commission staff, September 16, 2009. 24 Dhankhar, <strong>India</strong>: Livestock <strong>and</strong> Products, September 14, 2009, 8; USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 239. 6-9
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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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CHAPTER 4 Indian A
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Page 81 and 82: Food processing in India</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
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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
Page 119 and 120: Indian Express.com
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: BOX 6.2 Wheat—Continued Yet, <str
Page 131 and 132: notices that must be integrated wit
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
Page 152 and 153: Private mandis Som
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 162 and 163: The lack of infras
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 174 and 175: Food Processing and</strong
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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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