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

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U.S. Foreign Direct Investment U.S. firms are active participants in the <strong>India</strong>n food sector through FDI. U.S. FDI in <strong>India</strong>, most prominently in food <strong>and</strong> beverage processing, alcoholic beverage industries, <strong>and</strong> quick-service restaurants, permits U.S. agricultural firms to access <strong>India</strong>n consumers directly, while bypassing many trade barriers. U.S. firms report that the <strong>India</strong>n government encourages FDI <strong>and</strong> that they generally have not experienced market access or national treatment barriers. Many U.S. firms prefer to operate in <strong>India</strong> through joint ventures rather than wholly owned affiliates. Local partners can be particularly useful in helping U.S. firms navigate through central <strong>and</strong> state government bureaucracies <strong>and</strong> the intricacies <strong>of</strong> local business customs. The <strong>India</strong>n market <strong>of</strong>fers incentives <strong>and</strong> disincentives for U.S. agriculture-related FDI. Incentives for U.S. FDI include access to the large <strong>and</strong> growing <strong>India</strong>n consumer market, an enhanced ability to adapt products to local needs <strong>and</strong> requirements, <strong>and</strong> the ability to bypass tariffs <strong>and</strong> NTMs that may inhibit U.S. exports. The <strong>India</strong>n government also provides some regulatory FDI incentives, such as tax rebates linked to Special Economic Zones. Disincentives to FDI include a ban on FDI in most farming activities, occasionally difficult relations with joint venture partners, complex licensing <strong>and</strong> regulatory systems, <strong>and</strong> a disjointed national market in which it is difficult to achieve economies <strong>of</strong> scale because <strong>of</strong> logistical constraints <strong>and</strong> widely varying state regulations. Intellectual Property Rights <strong>India</strong>n intellectual property rights (IPR) policies reportedly are <strong>of</strong> critical importance to U.S. seed firms operating in <strong>India</strong>, but U.S. firms in most other agricultural sectors did not identify IPR as a significant trade or investment barrier. Three factors identified by U.S. <strong>and</strong> global seed firms as critical to participation in the <strong>India</strong>n market are strong <strong>and</strong> effective IPR laws, market-based pricing, <strong>and</strong> science-based regulatory review <strong>of</strong> new seed technologies. <strong>India</strong> recently enacted a plant variety protection law <strong>and</strong> patent provisions for seed biotechnology inventions, but broad exceptions in the laws, delayed implementation, <strong>and</strong> uncertainty about enforcement undermine the effectiveness <strong>of</strong> these IPR protections. State-level restrictions on seed prices <strong>and</strong> time-consuming <strong>and</strong> unpredictable regulatory review also hinder the commercialization <strong>of</strong> new seed technologies. In the absence <strong>of</strong> effective regulatory review <strong>and</strong> IPR enforcement, illegal <strong>and</strong> counterfeit seed markets have flourished, to the detriment <strong>of</strong> legitimate products. Quantitative Findings <strong>India</strong>n tariffs are estimated to have reduced U.S. agricultural exports by as much as $291 million in 2007. Economic simulations suggest that <strong>India</strong>n agricultural tariffs reduced U.S. agricultural exports to <strong>India</strong> by $200–291 million in 2007. In the absence <strong>of</strong> <strong>India</strong>n tariffs, total U.S. exports to <strong>India</strong> would have been 42–61 percent higher (table ES.4). vi
TABLE ES.4 <strong>India</strong>: Simulated effects <strong>of</strong> removing <strong>India</strong>n tariffs on selected U.S. food <strong>and</strong> agricultural exports, 2007 Items Average tariff rate Simulated change in U.S. exports Percent Million $ Almonds, fresh or dried, inshell 20 27–33 Soybean oil 40 17–22 Fresh apples 50 17–21 Cotton 10 3–26 Fresh grapes 30 4–5 All other ( a ) 132–184 Total 24 200–291 Source: Commission economic modeling simulations. a Not applicable 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> more rapidly than modeling simulations indicate because <strong>of</strong> the possible additional effects <strong>of</strong> economic growth in <strong>India</strong> <strong>and</strong> market development by U.S. exporters, two factors not included in the simulation. Economic simulations suggest that <strong>India</strong>n NTMs restricted U.S. exports <strong>of</strong> wheat by more than $146 million in 2007. Economic simulations were conducted on a set <strong>of</strong> U.S. agricultural product sectors for which (1) <strong>India</strong>n import prices were higher than world prices <strong>and</strong> (2) Commission research indicated that specific NTMs were impeding U.S. agricultural exports. These sectors include dairy products (lactose, whey products, <strong>and</strong> nonfat dry milk); beverages (wine <strong>and</strong> spirits); cereal grains, other than wheat (corn <strong>and</strong> other grains); <strong>and</strong> meat products (pork <strong>and</strong> poultry), which have positive NTM price gaps. Simulations were also conducted for wheat, for which U.S. exports to the world are large but U.S. exports to <strong>India</strong> were zero in 2007 owing to NTM restrictions. The estimated increase in U.S. exports <strong>of</strong> wheat following removal <strong>of</strong> <strong>India</strong>n NTMs would have been $146–334 million in 2007. The increase in other U.S. exports following NTM removal would have been significantly smaller (table ES.5). TABLE ES.5 <strong>India</strong>: Simulated effects <strong>of</strong> removing certain NTMs on selected U.S. food <strong>and</strong> agricultural exports, 2007 Items Estimated tariff equivalent <strong>of</strong> NTMs Simulated change in U.S. exports Percent Million $ Wheat ( a ) 146–334 Dairy products 27 15–20 Beverages 75 6–9 Other cereal grains b 151 2–8 Meat products 8 0.08–0.10 Source: Commission economic modeling simulations. a Because there were no U.S. wheat exports to <strong>India</strong> in the 2007 base year, there is no estimated tariff equivalent. b Grains other than wheat <strong>and</strong> rice, such as corn, sorghum, <strong>and</strong> oats. vii
Page 1 and 2: United States International Trade C
Page 3 and 4: U.S. International Trade Commission
Page 5: Abstract This report describes <str
Page 8 and 9: TABLE ES.1 India:
Page 10 and 11: U.S. agricultural products face str
Page 15 and 16: CONTENTS Page Abstract ............
Page 17 and 18: CONTENTS―Continued Chapter 6 <str
Page 19 and 20: CONTENTS―Continued Figures 1.1. <
Page 21 and 22: ACRONYMS AND TERMS AAY Antodaya Ann
Page 23: ACRONYMS AND TERMS—Continued RGGV
Page 26 and 27: TABLE 1.1 India: A
Page 28 and 29: FIGURE 1.1 India:
Page 30 and 31: India’s central
Page 32 and 33: Despite their weak economic pr<stro
Page 34 and 35: Approach Current India</str
Page 36 and 37: Bibliography Birner, Regina, Surupt
Page 38 and 39: World Bank. Agriculture for Develop
Page 46 and 47: premium); (2) India</strong
Page 48 and 49: include government export restricti
Page 54 and 55: Exports by Major Trading Partner <s
Page 57 and 58: CHAPTER 3 Domestic Consumption Over
Page 59 and 60: TABLE 3.2 India: P
Page 61 and 62: 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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For most crops, however, In
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The Farm Sector soybeans 29 —but
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Food processing in India</s
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BOX 4.1 The Central Government’s
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BOX 4.2 Does the Minimum Support Pr
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August 3, 2009, New Delhi announced
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known as zamindars, have doubled or
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that the PFA Act was strictly enfor
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———. Bharat Nirman: A Time-Bo
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Organisation for Economic Co-operat
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CHAPTER 5 TARIFFS Overview
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sensitive. They include vegetable f
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wholly milled rice and</str
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The Indian governm
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India also reporte
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Reference Prices Reference prices,
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Landing Fees <stro
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Simulated Effects
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and nuts” by $0.
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5-19 TABLE 5.4 India</stron
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Bibliography Acharya, Keya. “Thor
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Indian Express.com
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CHAPTER 6 Nontariff</strong
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foreign sources. 6 For example, SPS
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BOX 6.1 Milk and M
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BOX 6.2 Wheat—Continued Yet, <str
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perpetuated continuously. The impor
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notices that must be integrated wit
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import corn under the TRQ is too bu
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Customs Procedures India</s
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Corruption Interests within <strong
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TABLE 6.2 India: E
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Bibliography American Apparel <stro
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Mattson, Jeremy W., Won, W. Koo, <s
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———. 2009 National Trade Esti
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TABLE 7.1 India: C
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First Point of Sal
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Private mandis Som
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approximately 65 million households
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7-10 TABLE 7.2 India</stron
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poor communications infrastructure
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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
Page 238 and 239:
Page 240 and 241:
Page 243:
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
Page 277 and 278:
Applied ad valorem tariff equivalen
Page 279 and 280:
We considered the possibility that
Page 281 and 282:
Estimation of <str
Page 283 and 284:
Bibliography Anderson, Kym, Mariann
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