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

Yet, 2007 was not a representative year for <strong>India</strong>’s wheat market. <strong>India</strong>n imports <strong>of</strong> wheat
fluctuate greatly from year to year <strong>and</strong> were unusually high in 2006 <strong>and</strong> 2007 by
historical st<strong>and</strong>ards. <strong>India</strong>’s annual wheat imports in 2006 <strong>and</strong> 2007 amounted to
approximately $1.3 billion (5–6 million mt) in each year. By contrast, in the 12-year
period from 1997 to 2008, <strong>India</strong> reported imports <strong>of</strong> less than $1 million (less than
5,000 mt) during six years, including two years <strong>of</strong> zero imports, <strong>and</strong> imports <strong>of</strong> $180–
$280 million (700,000 mt to 2 million mt) in four years. An assumption that U.S. wheat
sales would equal an amount equivalent to more than 20 percent <strong>of</strong> <strong>India</strong>’s 2007 wheat
imports leads to unrealistically large displacement <strong>of</strong> <strong>India</strong>’s domestic production <strong>of</strong>
wheat <strong>and</strong> similarly unrealistic effects on <strong>India</strong>’s other crops.
Accordingly, we assumed that, in the absence <strong>of</strong> <strong>India</strong>n NTMs, U.S. wheat exports to
<strong>India</strong> would represent the U.S. global share <strong>of</strong> world wheat exports over a longer term,
applied as a share <strong>of</strong> <strong>India</strong>’s typical imports <strong>of</strong> wheat. For the last 10 years in which <strong>India</strong>
reported positive imports, the median imports amounted to approximately 1.04 million mt,
or about 20.6 percent <strong>of</strong> <strong>India</strong>’s 2007 imports. The U.S. median share <strong>of</strong> world wheat
exports over the 10 years from 1999 to 2008 is 26.0 percent. Thus, a typical U.S. global
market share in the long term <strong>of</strong> <strong>India</strong>’s typical wheat imports amounts to approximately
5.36 percent <strong>of</strong> <strong>India</strong>’s 2007 imports. 18 This share was the basis for the estimation
presented here.
Simulation <strong>of</strong> Economic <strong>Effects</strong>
The NTM price gaps were aggregated to GTAP sectors, <strong>and</strong> the effects <strong>of</strong> their removal
were simulated in the GTAP model. The estimated price gaps, before <strong>and</strong> after
aggregation, are presented in table 6.1. Because <strong>of</strong> the large values for many <strong>of</strong> the price
gaps (100–1,000 percent), it is not computationally tractable to estimate their removal
using a PE model simulation. The aggregation to GTAP sectors reflects the fact that, in
some cases, estimated price gaps at the HS6 level apply to some products in the sector
but not all, as reflected in table 6.1, which shows the difference between the average
NTM price gaps for relevant products <strong>and</strong> for the GTAP sector. The price gaps were
aggregated to the sector level using a method that holds the implied NTM rents for the
aggregate equal to the sum <strong>of</strong> implied NTM rents at the HS6 level. 19 For wheat, the
simulation was performed in such a manner as to set the final share <strong>of</strong> U.S. exports in
<strong>India</strong>’s imports at 27 percent.
A GTAP model simulation baseline for the NTM estimates was prepared excluding the
tariffs, <strong>and</strong> the sector-specific price gaps were simulated as gaps between the c.i.f. value
<strong>and</strong> the l<strong>and</strong>ed duty–paid value. Such price gaps were then removed. The results <strong>of</strong> this
procedure are reported in table 6.2. These results include a sensitivity analysis with
respect to the elasticities, similar to that performed for tariffs.
18 206 * 0.260 = 0.0536, approximately.
19 This method uses the relation
(reference export unit value)*(1 + transport margin + NTM price gap) = (reference import unit value).
Thus, implied NTM rents = (NTM price gap/(1 + transport margin + NTM price gap))*(value <strong>of</strong> c.i.f.
imports).
The usual method <strong>of</strong> trade weighting yields unrealistic results in this case because, for price gaps
exceeding 100 percent, the implied tariff revenues are larger than the value <strong>of</strong> c.i.f. imports <strong>and</strong> not a realistic
estimate <strong>of</strong> the value <strong>of</strong> NTM rents, which must be a share <strong>of</strong> the value <strong>of</strong> imports.
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