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A new report by the US International Trade Commission argues that India’s agricultural tariffs are keeping out American exports, that such obstruction is a concern to the USA, and that removal of these tariffs could result in a leap of up to 60% in US agricultural exports to India
The interests of US agribusiness and food exporters is being strenuously supported by a new report by the US International Trade Commission (USITC), released in November 2009, entitled ‘India: Effects of Tariffs and Non-tariff Measures on US Agricultural Exports’. The report argues that India’s agricultural tariffs are keeping out American exports, that such obstruction is a concern to the USA, and that removal of these tariffs can result in a leap of up to 60% in US agricultural exports to India. The USITC report says: “Despite robust US agricultural exports worldwide, US exports to India are limited, both in value and in the range of products. In 2008, India received less than one-half of 1% of total US agricultural exports and ranked 39th among overseas markets for US agricultural products. Moreover, US agricultural goods accounted for only 6% of the Indian agricultural import market in 2008, compared to an 18% share of global markets.” The report points to what it calls India’s “sizeable and growing middle class” which is “expected to reach 500 million by 2025, which includes many affluent urban consumers interested in western-style foods” as offering great potential for US agricultural business. The report complains that the “low level of US agricultural exports to India is a concern to the US agricultural community, business representatives, and policymakers”. It adds that these groups view “high Indian tariffs and burdensome non-tariff measures (NTMs) as principal reasons impeding US products from entering the Indian market”. The study team states that the USITC, through this report, has responded to a request by the Senate Committee on Finance for information and analysis on the effects of Indian tariffs and non-tariff measures on US agricultural exports and US agricultural firms operating in India. “Economic simulations suggest that Indian agricultural tariffs reduced US agricultural exports to India by US$ 200-291 million in 2007,” the report says. “In the absence of Indian tariffs, total US exports to India would have been 42-61% higher. The estimated increase in US exports of wheat following removal of Indian NTMs would have been US$ 146-334 million in 2007.” The study shows that India’s applied tariff rates on agricultural products range from 10% to 150% and are levied almost exclusively on an ad valorem basis. Average applied tariff rates have declined significantly from 113% in 1991, prior to Indian economic liberalisation, to approximately 34% in 2007. “The wide gap between high WTO-bound and lower applied tariff rates allows India to vary its rates frequently and substantially, which creates uncertainty for US agricultural exporters,” the USITC report claims. India’s major agricultural imports are fats and oils, and grains. In 2008, India’s import bill for soybean oil was US$ 336 million, for other fats and oils US$ 379 million, and for palm oil US$ 2,379 million. India’s import bill for wheat was US$ 293 million, for animal feed US$ 126 million, for peas US$ 720 million (including US$ 90 million for peas from the USA), for beans US$ 447 million, for other vegetables US$ 265 million. In 2008, India paid US$ 617 million for cashews, US$ 220 for almonds (including US$ 158 million for almonds from the USA), US$ 479 million for hides and skins, and US$ 340 million for cotton (including US$ 112 million for cotton from the USA). Compared with total agricultural imports in 2008 by India, of US$ 8,533 million, our imports from the US were valued at US$ 497 million. The United States of America is the largest agricultural exporting country in the world, accounting for about 18% of global agricultural exports in 2008. It ranks among the world’s most competitive and leading exporters of several commodities, including soybean, corn, wheat, poultry, and cotton. According to the USITC, “The competitive advantage of US agricultural products in global markets is based on highly efficient production, marketing, and distribution systems coupled with supportive domestic policies”. The US is a major supplier to several Asian countries such as Indonesia (currently India’s largest agricultural products supplier) and Thailand. The USITC report will be well received and quickly exploited by the US-India Business Council (USIBC), whose members include several food and agricultural companies and trade associations, as these have already identified a number of tariffs and NTMs which they say are impeding US exports of such products as pistachios, chocolate and confectionery, frozen poultry, cheese, frozen French fries, and soybean oil. The US Department of Agriculture (USDA) and United States Trade Representative (USTR) have held several consultations with the Indian government in an attempt to open the market to US products. Just as the USITC relies on a large and expanding Indian middle class as proof of the potential to export, the USIBC sets great store by India’s GDP growth rate. “India now boasts GDP growth rates that far exceed those of other developing nations and are the envy of the entire world,” said the USIBC in an October 2009 presentation, ‘Unlocking India’s Rural Sector’. “Its rising middle class demands more than just bread. Food and agricultural operators based in India and abroad are responding to the country’s demands with an array of high-quality food products that contribute to India’s increasing nutritional requirements and add value to India’s agricultural supply chain. Indian collaboration with American private sector companies has risen to the challenge of meeting India’s growing appetite, while achieving remarkable strides towards food security.” The frontline beneficiaries are likely to be these members of the USIBC: Bharti Walmart (described in a promotional USIBC campaign as ‘Saving people money and building better lives’), Cargill (‘Nourishing India’), The Coca-Cola Company (‘Revitalising India’s water resources’), John Deere (‘Charting the path from the first to the second green revolution’), Mars, Inc (‘Pioneering efforts and investment in India’s pet care industry’), Monsanto (‘Strengthening rural communities through sustainable agriculture’), Paramount Farms (‘Bringing California pistachios to India’), and PepsiCo (‘Performing with purpose for Indian farmers’). For US agricultural business watching the impact of the November 2009 USITC study and report, a major point of contention is the USITC’s observation that “India’s WTO-bound tariff levels are much higher than its applied rates” because these create “gaps (that) allow the Indian government to modify its tariff rates in response to domestic and international market conditions”. The study has emphasised its finding that the Government of India “frequently changes its rates on heavily traded international commodities, such as wheat, rice, sugar, and vegetable oils, to mitigate food price inflation, depending on market conditions”. The study does make the social connections: if domestic agricultural prices rise, tariff rates are lowered to create downward pressure on those prices to minimise the impact on consumers; when prices fall, the rates are often increased to protect farmers by raising the overall cost of imports. But there is no mention of the agrarian crisis, rural livelihoods needs or the growing impacts of the global financial crisis on India’s smallholder agricultural communities. Instead, says the USITC study, “this tariff rate variability and the complex notification process for announcing tariff rate changes create uncertainty and are an additional impediment for US agricultural exporters”. The USITC study and report and its implications for agricultural policy in India come as one more attack on an already weakened and crisis-ridden rural economy. Even though central and state governments have shown little willingness to undertake the kind of massive programmes of investment in rural infrastructure and productive job-creation that is critical to mitigating the impact of multiple crises on the rural population, they will come under renewed pressure from the ‘evidence’ provided in this USITC and subsequent studies whose object is the consolidation of agribusiness opportunities. -By Rahul Goswami (Rahul Goswami is an independent journalist based in Goa) Infochange News & Features, December 2009
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