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

CHAPTER 5
TARIFFS
Overview
<strong>India</strong>n tariff policy is focused on supporting <strong>India</strong>’s domestic agricultural policy
objectives discussed earlier: food security, food self-sufficiency, <strong>and</strong> supporting farmer
incomes. As a result, <strong>India</strong>n agricultural tariffs are among the highest in the world. The
average <strong>India</strong>n World Trade Organization (WTO) bound tariff rate for agricultural
products is substantially higher than that <strong>of</strong> many other developing countries. <strong>India</strong>n
applied tariff rates vary substantially by product <strong>and</strong> average approximately 34 percent,
creating an impediment to U.S. agricultural exports. <strong>India</strong> also levies additional duties
that further increase the cost <strong>of</strong> imported goods. An additional problem noted by U.S.
exporters is the large difference between <strong>India</strong>’s bound <strong>and</strong> applied tariff rates on many
agricultural products, which allows the <strong>India</strong>n government to modify its tariffs
substantially while complying with its WTO commitments. For example, the <strong>India</strong>n
government tends to frequently modify tariffs on food staples, such as wheat, pulses, rice,
sugar, <strong>and</strong> vegetable oils. This variability, as well as the complex process for notifying
<strong>India</strong>’s trading partners <strong>of</strong> tariff-rate changes, creates uncertainty <strong>and</strong> acts as an
additional impediment for certain U.S. exports. 1
Commission modeling simulations estimated that, in the absence <strong>of</strong> <strong>India</strong>n agricultural
tariffs, U.S. agricultural exports to <strong>India</strong> would have been 42–61 percent higher in 2007,
which is equivalent to $200–291 million. U.S. exports most affected by <strong>India</strong>n
agricultural tariffs in 2007 were almonds, fresh apples, cotton, soybean oil, <strong>and</strong> certain
other vegetable fats <strong>and</strong> oils.
Bound <strong>Tariffs</strong> <strong>and</strong> Tariff-Rate Quotas
<strong>India</strong> bound its tariff rates on imports <strong>of</strong> all agricultural products as a part <strong>of</strong> its Uruguay
Round commitments under the General Agreement on <strong>Tariffs</strong> <strong>and</strong> Trade. The average
<strong>India</strong>n bound tariff rate for agricultural products is 114 percent ad valorem, which is
among the highest in the world <strong>and</strong> much higher than the average bound rates <strong>of</strong> other
developing countries such as Brazil (36 percent) <strong>and</strong> China (16 percent). 2 In comparison,
the average bound tariff rate for agricultural products in the top 10 markets for U.S.
agricultural exports is 34 percent. 3 Moreover, the average <strong>India</strong>n bound tariff rate for
agricultural products is considerably higher than <strong>India</strong>’s average bound rates for
nonagricultural products (36 percent). 4
The majority <strong>of</strong> <strong>India</strong>n bound tariff rates for agricultural products are between 50 <strong>and</strong>
150 percent ad valorem. Only 4 percent <strong>of</strong> tariff rates for agricultural products are bound
1 USIBC, written submission to the Commission, June 26, 2009, 7.
2 Only 12 WTO member countries have higher average bound agricultural tariffs than <strong>India</strong>: Bangladesh,
Lesotho, Malawi, Mauritius, Nigeria, Norway, Saint Lucia, Saint Vincent <strong>and</strong> the Grenadines, Tanzania,
Tunisia, Zambia, <strong>and</strong> Zimbabwe. WTO, World Tariff Pr<strong>of</strong>iles, July 2008.
3 The top 10 U.S. WTO agricultural export markets include Canada, Mexico, EU, Japan, China, Korea,
Taiwan, Indonesia, Egypt, <strong>and</strong> Hong Kong. GTIS, World Trade Atlas Database (accessed May 6, 2009).
4 WTO, World Tariff Pr<strong>of</strong>iles, July 2008, 94.
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