U.S. think tank: Indian policy hurting ag trade and innovation
In a March hearing, Washington-based think tank the Information Technology and Innovation Foundation, urged the U.S. Congress to reconsider its trade ties with India. Senior analyst Steve Ezell argued against recent Indian trade decisions that he described as “innovation mercantilist” policies intended to favor local production. In conversation with www.freshfruitportal.com, Ezell explained what such policies could mean for agricultural trade and industry growth.
"When you look at U.S.-India trade in agricultural products, it turns out that India exports US$4 billion a year in agriculture to the United States but the United States exports only US$900 million to India. So our imports are four times larger than our exports," Ezell said.
"It’s interesting when there are issues ensuring that the large population is adequately fed. India's consumers would only benefit if there was more openness to receiving U.S. agricultural exports, given that we are especially competitive and efficient in production."
The U.S.-India agricultural trade deficit ties into a greater theme, Ezell explained, of protectionist policies that shoot India in the foot.
His report, "The Indian Economy at a Crossroads," highlights the information and communications technology trade in particular. When applied to agriculture, however, the analyst described restrictive policies and tariffs that hinder infrastructure, competitive retail and food security.
Ezell used dairy as an example of how strict policy can block out an otherwise competitive industry.
"The U.S. hasn’t exported any dairy products to India since 2003, largely because of import restrictions that the Indian government has placed with certifications and requirements that are not necessarily scientifically warranted. You see this across the board," he explained.
"The U.S. dairy industry is one of the most competitive agricultural industries the U.S. has and it is a net exporter to the rest of the world, but not to India because of these import and phytosanitary restrictions. It just doesn’t make sense when there is a challenge is to feed the population."
Beyond dairy, Ezell described steep tariffs that discourage business and bump up prices.
"For the U.S. into India, you pay an average of 15% to 30% on tariffs for fruits and vegetables, 30% to 60% on dairy, 80% on rice. Not only considering the damage they do to exporters from the United States, they raise the costs of critical food stuffs for Indian consumers and drive inflation in the Indian market place," he said.
According to Ezell, basic foods in India have seen an inflation rate of 15-20% over the last year.
When it comes to providing for itself, Ezell added that India does not currently have what it takes to be totally self-sufficient.
"30% of agricultural produce in India does not reach the market place. Of the remaining 70% that does, more than 50% is lost due to poor transportation and storage technology," he said.
"At the end of the day, it’s not an issue that India can’t produce the food it needs for its citizens. It’s that it lacks the appropriate infrastructure in terms of roads and highways, and the distribution structure in terms of a competitive retail environment that would enable them to get their food product to the populace."
From a food supply perspective, Ezell said one of the greatest things that could benefit India would be the introduction and growth of international retailers like Walmart and Carrefour.
"The key thing is competition. Trade engenders competition and that is one of the most powerful productivity driving forces that trade delivers. It exposes domestic firms to international competition and it forces them to raise their levels of productivity and efficiency," he says.
Ezell encouraged India to focus on creating an attractive foreign investment environment, rather than following the lead of forced localization trade policies like those coming out of China.
"India has the growing demographic dividends and it certainly wants to drive economic growth. But we think a better way to achieve those perfectly appropriate goals is to embrace economic liberalization, open trade, market-based competition. That’s the way it can get to the growth it seeks," he said.
In the meantime, Ezell recommended that the U.S. government "add sticks to carrots" to discourage current Indian policy trends.
In his March publication, he called for an investigation by the U.S. International Trade Commission on how such policies may damage commerce. He also recommended India be removed from the Generalized System of Preferences and encouraged preparation for a dispute before the World Trade Organization.
At the end of the year, Ezell expects to publish more extensive analysis, to be presented formally in New Dehli.
Photo: Port of Chennai, Planemad via Wikimedia Commons