NITI Aayog Paper on India-US Agricultural Trade

A recent paper by NITI Aayog recommends reducing or eliminating tariffs on various agricultural imports from the United States, including rice, dairy, poultry, corn, apples, almonds, and genetically-modified soya. This is proposed as part of a potential India-US Free Trade Agreement.

Rice Imports

• The paper suggests eliminating import tariffs on US rice, arguing that India is already a large exporter and faces minimal risk from imports.
• Historically, post-1960s, India faced food shortages and depended on US food imports under the PL-480 law.
• During GATT negotiations (1964–1979), India committed to zero tariffs on staples like rice, wheat, and skimmed milk, leading to challenges in raising tariffs later.
• The renegotiation under GATT’s Article XXVIII in the 1990s was costly, requiring India to lower tariffs on other products like butter and cheese.
• The paper misses the critical lesson that once tariffs are reduced, regaining flexibility is difficult and expensive.

Global Grain Price Volatility

• The paper overlooks risks related to global grain price fluctuations. For instance, from 2014 to 2016, falling prices affected African farmers.
• Without tariffs, India may face cheap US grain floods, discouraging local farming and increasing dependency on imports.
• During price spikes (2005–08, 2010–11), India could face costly emergency imports, as seen in Ghana and Nigeria.
• To protect over 100 million small farmers, India must maintain tariffs on staples to ensure stable food supplies.

Dairy and Poultry Imports

• The paper suggests cutting tariffs on US dairy and poultry and regulating imports via SPS (sanitary and phytosanitary) standards.
• India’s SPS enforcement is currently weak, making tariffs a more reliable protective measure.
• The US opposes India’s rule on animal feed restrictions, critical for health and cultural reasons.

GM Corn and Soya Seeds

• NITI Aayog proposes importing US corn for ethanol blending and GM soybean seeds under a controlled model.
• India's weak supply chain controls make it difficult to prevent GM contamination in local agriculture.

Recommendations

• India should maintain tariff flexibility to protect food security, rural incomes, and manage market shocks.
• Open discussions with stakeholders are necessary before making binding trade decisions, given the sector's impact on 700 million people.