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

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The U.S.-<strong>India</strong> Business Council states that non-market-based pricing <strong>of</strong> seeds <strong>and</strong> intellectual property infringement threaten the continued availability <strong>of</strong> new <strong>and</strong> improved seed technologies <strong>and</strong> thus the ability <strong>of</strong> <strong>India</strong>n farmers to compete with U.S. <strong>and</strong> other global agricultural interests. 45 U.S. <strong>and</strong> other global firms report that they are reconsidering investment decisions, product <strong>of</strong>ferings, <strong>and</strong> business models in light <strong>of</strong> the state government pricing restrictions. 46 Price restrictions undermine the willingness <strong>of</strong> global firms to introduce their most valuable technologies to the <strong>India</strong>n market. Domestic firms’ innovative efforts also have been impaired by state government interference in pricing. 47 Biosafety Regulation A transparent <strong>and</strong> science-based biosafety regulatory system is essential for global <strong>and</strong> domestic firms seeking to introduce new seed technologies on the <strong>India</strong>n market, as well as for farmers <strong>and</strong> the consuming public. The stated goals <strong>of</strong> the <strong>India</strong>n biosafety system are to ensure that biotech crops pose no major risk to food safety, environmental safety, or agricultural production, <strong>and</strong> that farmers are not economically harmed by biotech crops. 48 The latter goal <strong>of</strong> protecting farmers is unique to <strong>India</strong>’s regulatory system. Based on this wide-ranging m<strong>and</strong>ate, regulatory review in <strong>India</strong> has been reported to take into account not just health <strong>and</strong> safety factors but also the manner in which a product will be commercialized, including whether a single company would have market exclusivity <strong>and</strong>/or the ability to charge relatively high prices in the event <strong>of</strong> an approval. Regulatory approval may be delayed or denied to avoid such a result. 49 U.S. <strong>and</strong> other global firms report that biosafety regulatory proceedings in <strong>India</strong> can be lengthy <strong>and</strong> unpredictable. 50 Lengthy regulatory proceedings can have the unintended effect <strong>of</strong> encouraging the growth <strong>of</strong> illegal seed markets to fill unmet dem<strong>and</strong> during protracted review periods (box 9.3). 45 USIBC, written submission to the Commission, June 26, 2009, 6. 46 Industry representatives, interviews by Commission staff, Mumbai, <strong>India</strong>, May 11–12, 2009; industry representatives, telephone interviews by Commission staff, January 21 <strong>and</strong> June 10, 2009. 47 Suresh <strong>and</strong> Rao, “Pr<strong>of</strong>iles <strong>of</strong> Four Top Biotech Companies,” 2009, 299. 48 Pray et al., “Costs <strong>and</strong> Enforcement,” 2006, 142. 49 Industry representative, telephone interview by Commission staff, June 10, 2009. 50 According to the NCGA, “[W]hile there is a policy for biotechnology registrations, overall <strong>India</strong>n policy regarding genetically modified organisms is not well-defined.” NCGA, written submission to the USITC, June 19, 2009, 1. Industry representative, telephone interview by Commission staff, June 10, 2009; industry representatives, interview by Commission staff, Mumbai, <strong>India</strong>, May 12, 2009; <strong>and</strong> USTR, 2009 National Trade Estimate Report on Foreign Trade Barriers, 2009, 240. 9-10
BOX 9.3 Illegal <strong>and</strong> Counterfeit Cottonseeds in <strong>India</strong> Enforcement <strong>of</strong> biosafety <strong>and</strong> IPR laws remains an ongoing challenge in <strong>India</strong>. Biotech seeds must be approved by the <strong>India</strong>n biosafety system; seeds that do not obtain regulatory approval are illegal. In 2001, unapproved biotech cottonseed was found in farmers’ fields in Gujarat, while the MMB product was still being reviewed by regulators for release. The illegal seed was identified as NB 151, a variety registered as a conventional hybrid by NavBharat Seeds but containing the Bt genetics developed by MMB. NavBharat Seeds was banned from the cottonseed business <strong>and</strong> prosecuted for violating biosafety laws, but the production, distribution, <strong>and</strong> widespread use <strong>of</strong> NB 151 reportedly continues today. The seed is produced through a network <strong>of</strong> seed companies, producers, <strong>and</strong> agents, many <strong>of</strong> whom are former contract growers for NavBharat Seeds. Illegal Bt cottonseed production <strong>and</strong> sales reportedly are concentrated in Gujarat <strong>and</strong>, to a lesser extent, in Punjab, Maharashtra, <strong>and</strong> Andhra Pradesh. According to press reports, 5 million packets <strong>of</strong> illegal seeds were produced in Gujarat in 2007. Government raids have had limited effect in stopping the activity. Counterfeit cottonseeds also are a substantial problem. Dealers label counterfeits with names similar to wellknown Bt cotton sources—for example, “Mahaco” rather than “Mahyco.” The counterfeits do not carry the insect-resistant trait <strong>of</strong> legitimate products. As mentioned elsewhere, “brown bagging,” where farmers <strong>and</strong> other parties sell repackaged br<strong>and</strong>ed seed <strong>and</strong> seed <strong>of</strong> unknown origin in brown bags in village markets, is also a common practice. Drawn-out regulatory proceedings, by keeping potentially high-dem<strong>and</strong> legitimate products out <strong>of</strong> the market, create a void that may be filled by illicit goods. In recognition <strong>of</strong> the importance <strong>of</strong> more timely regulatory review, <strong>India</strong> recently announced that it would adopt a new approval mechanism for cotton hybrids—one that will be based on genetic events (i.e., particular genetically engineered organisms) rather than on the particular hybrid. Under this new mechanism, any cotton hybrid incorporating one <strong>of</strong> the four already approved genetic events will go through a streamlined review process. This change is intended to ease market access for legitimate <strong>and</strong> safe products. Sources: Lalitha, Pray, <strong>and</strong> Ramaswami, “The Limits <strong>of</strong> Intellectual Property Rights,” March, 2008, 10–11; Business St<strong>and</strong>ard, “Guj Worst-Hit by Illegal Bt Cotton Production,” April 22, 2008; Government <strong>of</strong> <strong>India</strong>, Ministry <strong>of</strong> Environment <strong>and</strong> Forests, “New Procedure for Commercial Release <strong>of</strong> Bt Cotton Hybrids,” February 20, 2009; <strong>and</strong> Herring, “Persistent Narratives,” 2009, 16–17. High regulatory costs <strong>and</strong> lengthy procedures also can result in products being withdrawn from consideration if the costs <strong>of</strong> compliance outweigh the benefits the firm can obtain in a particular market. 51 Bayer CropScience, for example, reportedly pulled its biotech mustard seed from regulatory consideration in <strong>India</strong> in 2003 after approximately nine years <strong>of</strong> review <strong>and</strong> testing <strong>and</strong> millions <strong>of</strong> dollars in costs. Bayer reported that the continued costs, uncertainty about whether the product would ever be approved, <strong>and</strong> potentially small market size all contributed to its decision not to continue with commercialization <strong>of</strong> the product in <strong>India</strong>. 52 Regulatory review that is not timely <strong>and</strong> science-based does not serve either farmers or the consuming public. Biotech seeds are being developed to incorporate traits such as pest resistance, drought tolerance, <strong>and</strong> yield <strong>and</strong> nutritional enhancement that could substantially assist <strong>India</strong> in meeting its goals <strong>of</strong> self-sufficiency, food security, <strong>and</strong> supporting farmer incomes. 53 A large number <strong>of</strong> such products are currently undergoing regulatory review in <strong>India</strong>. 54 The product closest to completing review appears to be Bt 51 Researchers have compared the costs <strong>of</strong> biosafety review in <strong>India</strong> <strong>and</strong> China <strong>and</strong> found that the cost <strong>of</strong> initial approval <strong>of</strong> Bt cotton in <strong>India</strong> exceeded the cost in China by a ratio <strong>of</strong> 20:1, <strong>and</strong> that approval took substantially more time in <strong>India</strong>. Pray, et al., “Costs <strong>and</strong> Enforcement,” 2006, 146–50. 52 Pray, Bengali, <strong>and</strong> Ramaswami, “The Cost <strong>of</strong> Biosafety Regulations,” 2005, 273. 53 These goals are discussed in chapter 1. 54 Singh, <strong>India</strong>: Agricultural Biotechnology, July 24, 2009, 3. 9-11
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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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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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Page 166 and 167: Bibliography Banerjee, A. Dairying
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Page 186 and 187: Bibliography Bahn, Niti, an
Page 188 and 189: International Center for Alcohol Po
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Page 192 and 193: BOX 9.1 The UPOV System for Plant V
Page 194 and 195: that the public sector in I
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Page 205: APPENDIX A REQUEST LETTER
Page 208 and 209: The Honorable Sham L. Arano
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Page 213: APPENDIX C HEARING WITNESSES
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Page 223 and 224: highest in the Asia-Pacific region.
Page 225 and 226: to U.S. exports to India</s
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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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