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

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to 2008, but the country has remained near the 50th percentile <strong>of</strong> all countries ranked each year, lower than comparable economies such as Brazil <strong>and</strong> China. 81 U.S. <strong>and</strong> foreign government <strong>and</strong> industry <strong>of</strong>ficials with experience in <strong>India</strong>n agricultural operations <strong>of</strong>fer supporting evidence regarding corruption among low-level <strong>of</strong>ficials in <strong>India</strong>. Among the examples provided are rejection <strong>of</strong> U.S. agricultural products at certain <strong>India</strong>n ports owing to different levels <strong>of</strong> bribery required by each port’s <strong>of</strong>ficials, <strong>India</strong>n government agricultural development programs in which participation is contingent on bribery, clearance delays <strong>of</strong> perishable shipments absent bribes to port <strong>of</strong>ficials, waivers <strong>of</strong> required certifications following bribe payments, <strong>and</strong> the use <strong>of</strong> <strong>India</strong>n food safety regulations as a pretext to close port operations until shippers or importers pay bribes to <strong>of</strong>ficials. 82 One <strong>India</strong>n industry representative termed the payment <strong>of</strong> bribes at this level “speed money” <strong>and</strong> estimated the required amount to be 2 percent <strong>of</strong> the transaction value. 83 Modeling <strong>of</strong> <strong>Nontariff</strong> <strong>Measures</strong> Commission staff conducted economic modeling simulations on a set <strong>of</strong> U.S. agricultural product sectors for which <strong>India</strong>n import prices were higher than world prices—i.e., they have positive price gaps that can be interpreted as tariff equivalents—<strong>and</strong> for which Commission staff research indicated that NTMs were impeding U.S. agricultural exports. The estimated increase in U.S. exports <strong>of</strong> agricultural products to <strong>India</strong> following removal <strong>of</strong> <strong>India</strong>n NTMs, relative to a 2007 baseline, is $187–391 million, most <strong>of</strong> which is an increase in U.S. exports <strong>of</strong> wheat <strong>of</strong> $146–334 million (U.S. wheat exports worldwide in 2007 were $8.3 billion). Increased exports <strong>of</strong> U.S. dairy products <strong>and</strong> wine composed most <strong>of</strong> the remaining increase in exports. These estimates include a sensitivity analysis for a range <strong>of</strong> elasticities, similar to that used in the estimates for effects <strong>of</strong> tariff reductions (table 6.2). 84 The products in table 6.2 are subject to NTMs that have a distinct effect on that specific product. Examples include issues relating to phytosanitary certification <strong>and</strong> state trading for wheat <strong>and</strong> other food grains; sanitary issues for meat products, dairy products, <strong>and</strong> 81 On a scale <strong>of</strong> 0 (highly corrupt) to 10 (highly clean) relating to perceptions <strong>of</strong> the degree <strong>of</strong> corruption as reported by business people <strong>and</strong> country analysts, <strong>India</strong> scored 2.8 in 2004 <strong>and</strong> 3.4 in 2008. Transparency International, “2008 Corruption Perceptions Index,” September 23, 2008. See WTO, “Trade Policy Review: Report <strong>of</strong> the Secretariat: <strong>India</strong>,” July 24, 2007, 20 n.13. The Worldwide Governance Indicators project at the World Bank, which measures control <strong>of</strong> corruption, also ranked <strong>India</strong> lower than the 50th percentile in six <strong>of</strong> seven years from 2002 to 2008. Worldwide Governance Indicators Project, “Governance Matters 2009,” n.d. (accessed September 20, 2009). 82 Government <strong>of</strong>ficials, interviews by Commission staff, New Delhi, <strong>India</strong>, May 4, 2009; industry representatives, interview by Commission staff, New Delhi, <strong>India</strong>, May 4, 2009; industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 30, 2009; industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, June 1, 2009; government <strong>of</strong>ficial, interview by Commission staff, New Delhi, <strong>India</strong>, June 2, 2009; industry representative, interview by Commission staff, Washington, DC, June 19, 2009; <strong>and</strong> Tracy, written testimony to the USITC, April 22, 2009. 83 Industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 29, 2009. 84 Estimates <strong>of</strong> economic effects are affected by estimates <strong>of</strong> the elasticity <strong>of</strong> substitution affecting traded goods. The methods for estimating economic effects for tariffs <strong>and</strong> NTMs are broadly similar but differ in some details. See appendix H for further discussion. 6-18
TABLE 6.2 <strong>India</strong>: Estimated economic effects <strong>of</strong> removing NTMs on U.S. exports, 2007 Commodity groups containing food <strong>and</strong> agricultural products 2007 U.S. food <strong>and</strong> agricultural Range <strong>of</strong> simulated U.S. exports to <strong>India</strong> in the absence <strong>of</strong> <strong>India</strong>n NTMs Range <strong>of</strong> simulated change in U.S. exports to <strong>India</strong> in the absence <strong>of</strong> <strong>India</strong>n NTMs exports to <strong>India</strong> Low High Low High Low High Million $ Million $ Million $ Million $ Percent a Wheat 0.00 145.51 334.25 145.51 334.25 ( b ) ( b ) Cereal grains n.e.c. 1.13 2.67 8.64 1.54 7.50 135 661 Meat products n.e.c. 0.11 0.19 0.22 0.08 0.10 71 93 Dairy products 8.66 23.26 29.10 15.04 20.44 183 216 Beverages <strong>and</strong> tobacco products 4.19 10.39 13.53 6.20 9.34 146 223 Leather products 7.65 5.16 4.96 -2.50 -2.70 -33 -35 Total 21.75 187.18 390.68 165.67 396.67 96 165 Source: Commission staff calculations. Note: “Low” <strong>and</strong> “High” refer to elasticities, not effects on U.S. exports; “not elsewhere classified” is denoted as “n.e.c.” a Total percentage changes for U.S. exports exclude wheat. b Not applicable. hides <strong>and</strong> skins; import bans for poultry; <strong>and</strong> labeling <strong>and</strong> import monitoring requirements for wine <strong>and</strong> alcoholic beverages. 85 NTM issues affecting importation <strong>of</strong> U.S. agricultural products generally, such as customs procedures, notice <strong>and</strong> comment procedures, <strong>and</strong> corruption, may also affect these products, as well as products not modeled. Estimation <strong>of</strong> the NTM effects involves three steps: estimation <strong>of</strong> price gaps, identification <strong>of</strong> policies associated with those gaps, <strong>and</strong> simulation <strong>of</strong> economic effects. Because the presence <strong>of</strong> an NTM raises domestic prices <strong>and</strong> reduces quantities <strong>of</strong> imports much as a tariff does, Commission staff first identified products in the study for which <strong>India</strong>n import prices are higher than export prices for the same goods from the same suppliers elsewhere in the world, after adjusting for transport costs. Commission staff estimated tariff equivalents for these products (table 6.3), 86 using data from the three-year period 2005–07 in order to take into account the annual variability both in agricultural prices <strong>and</strong> the policies involved. Commission staff also considered products for which the share <strong>of</strong> U.S. exports in <strong>India</strong>n imports is unusually low relative to the share <strong>of</strong> U.S. exports in other markets or for which <strong>India</strong>n imports are effectively zero. Second, among those products identified in the first step, Commission staff distinguished those products for which staff was able to document <strong>India</strong>n NTMs that restrict imports. These products include corn <strong>and</strong> other cereal grains, pork <strong>and</strong> poultry, dairy products, wine, <strong>and</strong> leather products, which have positive NTM price gaps, <strong>and</strong> wheat, for which U.S. exports to the 85 As noted below, the estimates <strong>of</strong> NTM price gaps make use <strong>of</strong> data from the three-year period from 2005 to 2007. The policies mentioned are applied in different ways in different years. All <strong>of</strong> the policies mentioned may not have been applied to all <strong>of</strong> the products in question in each <strong>of</strong> the three years, or subsequently. For example, as noted, certain policies pertaining to hides <strong>and</strong> skins (leather products) were relaxed in 2009. 86 These price gaps are estimated at the Harmonized System (HS) six-digit subheading level. Separate price gaps are estimated for U.S. exports to <strong>India</strong> <strong>and</strong> rest-<strong>of</strong>-world exports to <strong>India</strong>. Estimates <strong>of</strong> economic effects are presented at the GTAP sector level <strong>and</strong> not the HS six-digit subheading level for computational reasons. See appendix H. 6-19
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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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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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Page 89 and 90: known as zamindars, have doubled or
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Page 93 and 94: ———. Bharat Nirman: A Time-Bo
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Page 99 and 100: sensitive. They include vegetable f
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Page 133 and 134: import corn under the TRQ is too bu
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Page 137: Corruption Interests within <strong
Page 141 and 142: Bibliography American Apparel <stro
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Page 145: ———. 2009 National Trade Esti
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Page 166 and 167: Bibliography Banerjee, A. Dairying
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Page 174 and 175: Food Processing and</strong
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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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