December 11, 2009
News Release 09-104
Inv. No. 332-504
Contact: Peg O'Laughlin, 202-205-1819

U.S. farmers and food manufacturers lose millions of dollars each year in lost sales to India because of high tariffs and a wide array of nontariff measures (NTMs) that substantially raise the cost or effectively prohibit U.S. agricultural exports to the world's second most populous country, reports the U.S. International Trade Commission (USITC) in its report India: Effects of Tariffs and Nontariff Measures on U.S. Agricultural Exports.

The USITC, an independent, nonpartisan, factfinding federal agency, completed the report at the request of the U.S. Senate Committee on Finance.

As requested, the report provides an overview of Indian agricultural production, imports, and consumption during 2003 08; Indian tariffs and NTMs; the Indian food marketing and distribution system; and Indian government regulations relating to the agricultural market, including foreign direct investment and intellectual property rights policies. The study also provides economic modeling analysis of the effects of Indian tariffs and certain NTMs on U.S. agricultural exports. Highlights of the report follow.

• The United States was the world's leading agricultural exporter by value, $116 billion in 2008, with a 17 percent share of global export markets in 2008. Yet, U.S. exports to India amounted to just $497 million or 6 percent of the Indian agricultural import market in 2008.
• Indian WTO bound tariff rates on agricultural products, averaging 114 percent, are among the highest in the world. The majority of rates are between 50 and 150 percent, much higher than the average bound rates for other major developing countries such as Brazil and China.
• Average applied agricultural tariff rates have declined significantly from 113 percent since 1991, prior to Indian economic liberalization, to approximately 34 percent in 2007, but they remain among the highest in the world.
• The wide gap between high bound rates and lower applied rates allows India to vary its tariff rates frequently and substantially on certain commodities, which creates uncertainty for U.S. agricultural exporters.
• Broad intervention by the Indian government in the agricultural sector, including restrictive agricultural trade policies, is focused on three core domestic policy objectives: food security, food self-sufficiency, and income support for farmers.
• Agriculture is vital to the Indian economy, representing 17 percent of GDP and providing employment for more than 60 percent of the population. India is a major global producer of agricultural products and is largely self sufficient in agricultural production. Indian agricultural imports are relatively small and concentrated and supplied only 3 percent of Indian agricultural demand in 2008.
• Indian per capita food consumption, centered on staple foods, is low compared to other developing countries, but is rising with income growth. Rising income among middle-class Indians (200 300 million consumers) is driving increased consumption of nonstaple foods.
• Despite the size of the Indian market, inefficiencies in India's marketing and distribution system make it less attractive for U.S. agricultural producers. Marketing and distribution inefficiencies result from high levels of government intervention, poor quality and limited availability of storage and transportation infrastructure, and other factors.
• U.S. agricultural firms are active participants in the Indian market through foreign direct investment (FDI). FDI allows U.S. firms to adapt products to local needs and requirements and bypass tariffs and NTMs that constrain exports.
• Indian intellectual property rights (IPR) policies reportedly are of critical importance to U.S. seed firms operating in India, but U.S. firms in most other agricultural sectors do not identify IPR as a significant trade or investment barrier.

India: Effects of Tariffs and Nontariff Measures on U.S. Agricultural Exports (Investigation No. 332-504, USITC Publication 4107, November 2009) will be available on the ITC's Internet site at http://www.usitc.gov/publications/332/pub4107.pdf. A CD-ROM of the report may be requested by e-mailing pubrequest@usitc.gov, calling 202-205-2000, or contacting the Office of the Secretary, U.S. International Trade Commission, 500 E Street SW, Washington, DC 20436. Requests may also be faxed to 202-205-2104.

USITC general factfinding investigations, such as this one, cover matters related to tariffs or trade and are generally conducted at the request of the U.S. Trade Representative, the House Committee on Ways and Means, or the Senate Committee on Finance. The resulting reports convey the Commission's objective findings and independent analyses on the subjects investigated. The Commission makes no recommendations on policy or other matters in its general factfinding reports. Upon completion of each investigation, the ITC submits its findings and analyses to the requester. General factfinding investigation reports are subsequently released to the public unless they are classified by the requester for national security reasons.