Bitter-sour-sweet trade deals

“India will eliminate or reduce tariffs on US industrial goods, and a wide range of food and agricultural products, including dried distillers’ grains (DDGs), red sorghum for animal feed, tree nuts, fresh and processed fruit, soybean oil, wine and spirits, and additional products,” explained a farmers’ union while dissecting the much-hyped India-US bilateral trade deal. As a counter, Indian ministers and officials clarified that there is no threat to the farmers since imports meat, poultry, dairy items, soybean, maize, cereals like rice and wheat, sugar, and millets, are allowed. Commerce Minister Piyush Goyal said that apart from blocked imports, the growers can export spices, tea, coffee, copra, coconut oil, and fruits and vegetables at zero tariff.

However, there are a few discrepancies. Cheaper imports of (DDGs), a by-product of ethanol production derived from grain-based distillation, which is used as animal feed, can affect farm gate prices for corn and soy growers. “Control of the animal feed market will be monopolised by the US companies. America already exports maize, soya bean, and cotton. The US wheat is exported at Rs 18.5 per kg, which will kill the farmers if allowed to flood the markets. Imports of GM (genetically modified) foods and seeds will ruin our natural fertility, apart from damaging cereal, pulses, and oilseeds markets. Soy oil, and ethanol will be imported,” points out Samyukt Kisan Morcha.

Even the RSS-affiliated Bharatiya Kisan Sangh (BKS) raised concerns about GM crops. It issued a guarded welcome to the announcement that wheat and rice, milk and dairy products, fruits, vegetables, and spices have been excluded. But it adds, “GM crops, which are commonly used there (US) for animal feed, should not enter the country under any circumstances, under any name or condition.” According to BKS general secretary, Mohini Mohan Mishra, “GM crops have not yet been approved for food; research and investigation are ongoing. Information is being gathered on their negative impact on human and animal health, and they are proving to be unsuccessful crops.”

There is a lack of clarity about the tariffs. The US President Donald Trump’s claims that the “US will charge a reduced Reciprocal Tariff, lowering it from 25 per cent to 18 per cent. They (India) will likewise move forward to reduce their Tariffs and Non-Tariff Barriers against the US to ZERO.” According to the SKM, “Tariff on Indian goods rose from zero to three per cent in 2023-24 (pre-Trump era), and will become 18 per cent. Our (Indian) rates on US agri-products will be down from 30-150 per cent to zero. This will make Indian agriculture hang by the noose of US MNCs. If non-tariff barriers are reduced, it will help the import of milk from the US (despite the denials).”

At present, milk imports may not be on the table, but other indirect imports may crash the local prices and demand. “Imports of milk-based commodities, say, milk powder, tends to lower market prices,” explains former agriculture minister, Som Pal. According to former secretary in the ministry of fisheries, and dairy, Tarun Shridhar, the import of dairy-based products will “kill” the domestic sector. “We allow import of certain milk-based proteins for therapeutic purposes, usually on a case-to-case basis.” The US is the second largest exporter of whey protein, and the third-largest for lactose supply to India.

Among other concerns are the imports of soybean oil and wine. A reduction in tariff on soybean oil will increase imports, and reduce local prices. Although Goyal (minister) said that there was a tariff rate quota to maintain local production and price stability. Som Pal cites the example of palm oil, whose imports hurt the oilseed cultivation. The same may happen with soybean oil. Past experiences with SAFTA, ASEAN, and Sri Lanka show that unless sensitive sectors are shielded in all respects, and farmer voices included in negotiations, the benefits of trade deals risk local producers, and rural growers bear the brunt.

In fact, signatories stick to pledges to protect sensitive sectors, and agree to exclude products. Earlier, the ASEAN-India agreement led to a surge in palm oil imports from Malaysia and Indonesia, and Indian oilseed growers (of soybean and mustard) suffered due to cheaper oil. Tariff caps were later introduced, but imports remained high. Recently, there were criticisms related to the India-New Zealand treaty. The website of New Zealand Ministry of foreign affairs and trade stated that “valuable new quota access for kiwifruit and apples…. New Zealand is the first country to secure preferential access for apples… and the first kiwifruit exporter to secure tariff-free access….”

Similar clauses seem to be a part of the India-US deal, with a few preventive sub-clauses. The duty on American apples will be halved to 25 per cent but, as Goyal said, the higher minimum import price (`80/kg) will keep Indian prices high. Like in the case of New Zealand, there will be quota restrictions. However, one will need to see if the minimum price is negotiated regularly, as farm prices change rapidly from season to season, and within a season. If the price is retained over years, it will soon become ineffective and irrelevant, as will quota restrictions in times when imports overwhelm local supplies.

“The import of fresh fruit is a big concern. It affects growers, as there is no minimum support price on fruits,” observes Rajan Kshirsagar, president, Communist Party of India-affiliated All India Kisan Sabha (AIKS). “Five lakh tons of apples are imported, mainly from New Zealand, Australia, and the US. This is breaking the backbone of agriculture in Kashmir,” he stresses. Following the “mother of all deals” with the European Union (EU), the European Commission claimed “improved market access for EU agri-food exports,” and the deal “delivers an unmatched agricultural market access, compared to India’s other trade agreements such as with the UK and Australia.”

According to the Commission, “Indian tariffs on agri-food products are 36 per cent on average, and can be as high as 150 per cent. The agreement substantially reduces or eliminates them on EU exports of key agricultural goods.” In the cases of olive oil, margarine, and other vegetable oils, the tariffs will be down from the existing up to 45 per cent to zero. In kiwis and pears, it will drop from 33 per cent to 10 per cent. Imports of fruit juices and wines, either at zero or reduced tariffs, will rob the Indian farmers of additional revenues. Juices can affect the local prices of fruits, which are a crucial additional income source, and higher wine exports can wreak havoc with grapes and vineyards.

(The author has more than three decades of experience across print, TV, and digital media); views are personal