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

Marketing Federation <strong>of</strong> <strong>India</strong> Ltd. (NAFED), established in 1958; the Minerals <strong>and</strong>
Metals Trading Corporation (MMTC), established in 1963; <strong>and</strong> PEC Ltd., established in
1971. They import edible oils, sugar, wheat, fatty acids, pulses, soybean meal, rice, <strong>and</strong>
corn. 53
Importation <strong>of</strong> these bulk commodities through STE channels exclusively is known as
canalization. The United States <strong>and</strong> <strong>India</strong> concluded a quantitative restrictions agreement
eliminating this import method in December 1999, following a WTO dispute settlement
ruling. 54 The dispute settlement panel recommended that <strong>India</strong> bring its STE practices
into accord with the GATT provisions addressing STEs, an adjustment that the <strong>India</strong>n
government continues to implement.
<strong>India</strong>n STEs are forthright about the role they play in trying to stabilize agricultural
commodity domestic supply <strong>and</strong> prices <strong>and</strong> seeking to provide for food security at the
direction <strong>of</strong> the <strong>India</strong>n government, an activity that can include indemnification with
government funds. 55 In its most recent notification to the WTO on state trading, the
<strong>India</strong>n government confirmed its goals: “a fair return to the farmers as well [as] food
security i.e. availability <strong>of</strong> adequate food for all sections <strong>of</strong> the society at prices
affordable by them.” 56
The effects <strong>of</strong> STE actions that hinder trade, as outlined above, are compounded by a
corresponding lack <strong>of</strong> transparency about STE activities in the market. The WTO
attempts to gather information on STEs routinely through its requirement that WTO
member states file notifications every three years on their STE activities. 57 <strong>India</strong> last filed
its STE notification in 2001. Furthermore, despite a WTO requirement that member states
furnish statistics on products imported by STEs, such as value, quantity, <strong>and</strong> the
breakdown <strong>of</strong> imports between STEs <strong>and</strong> private traders, <strong>India</strong>n authorities do not collect
such data. 58
53 OECD, Agricultural Policies in Emerging Economies, 2009, 109. Certain STEs have focused on
particular agricultural commodities <strong>of</strong> high interest to the <strong>India</strong>n marketplace, <strong>and</strong> some were merged with
more general STEs. See “Welcome to The Jute Corporation <strong>of</strong> <strong>India</strong> Ltd.—A Govt. <strong>of</strong> <strong>India</strong> Enterprise,”
http://www.jutecorp.com/index.htm (accessed June 9, 2009); “Business <strong>India</strong> Info: State Trading Corporation
<strong>of</strong> <strong>India</strong> Ltd.,” http://money.newkerala.com/company-pr<strong>of</strong>ile-id-16610053.00.html (accessed June 9, 2009)
(information on the Cashew Corporation <strong>of</strong> <strong>India</strong>); <strong>and</strong> “STCL Ltd.,”
http://www.stclindia.com/html/pr<strong>of</strong>ile/about.html (accessed June 9, 2009) (information on STCL Ltd., a
trading company for cardamom <strong>and</strong> other spices).
54 WTO Appellate Body, “<strong>India</strong>—Quantitative Restrictions on Imports <strong>of</strong> Agricultural, Textile <strong>and</strong>
Industrial Products,” August 23, 1999. The ruling concluded that canalization, as implemented by <strong>India</strong> under
its then-existing balance <strong>of</strong> payments regime, was no longer justified. USTR, 2002 National Trade Estimate
Report on Foreign Trade Barriers, 2002, 175; USTR, 2003 National Trade Estimate Report on Foreign
Trade Barriers, 2003, 168–70.
55 For example, STC states that it “imports … to cover the domestic shortfalls <strong>and</strong> hold the price line.
STC serves the national objective by arranging timely imports at most competitive prices.” “Imports Into
<strong>India</strong>” (accessed June 10, 2009). During 2007–08, “[i]n [o]rder to arrest the rising price trend <strong>of</strong> pulses” in
the <strong>India</strong>n market, NAFED imported pulses “on behalf <strong>of</strong>” the <strong>India</strong>n government, which “agreed to
reimburse the losses to NAFED to the extent <strong>of</strong> 15%.” “International Trade <strong>of</strong> Nafed” (accessed
June 10, 2009).
56 WTO Working Party on State Trading Enterprises, “State Trading,” October 8, 2001, 7.
57 WTO, “Technical Information State Trading Enterprises” (accessed June 11, 2009).
58 WTO, “Trade Policy Review: Report <strong>of</strong> the Secretariat: <strong>India</strong>,” July 24, 2007, 61.
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