India has agreed to bring down the import duty on some fresh and processed food items, including blueberries, cranberries, turkey, duck, to 5-10 per cent, as a part of larger dispute settlement between New Delhi and Washington at the World Trade Organization (WTO).
The duty reduction will be applied to frozen turkey, frozen duck, fresh blueberries and cranberries, frozen blueberries and cranberries, dried blueberries and cranberries, and processed blueberries and cranberries. These items attract high import duty at the moment, and mainly hovers around 30-45 per cent.
The move is being seen as an approach to bolster strategic and economic ties between both nations.
The announcement was made by the United States Trade Representative (USTR) soon after the bilateral meeting between Prime Minister Narendra Modi and the United States President Joe Biden on Friday, on the sidelines of the G20 Leaders’ Summit in New Delhi.
While the duty reduction is a result of the negotiations between India and the US, the tariff cut will be applicable not only to the US, but to each and every country, as per the WTO rules.
“The duty reduction is on MFN (most favoured nation) basis,” government officials said. According to the WTO’s MFN principle, the customs duty is applicable to all WTO member nations.
While the product-by-product reduction in the import duty is yet to be announced, people aware of the matter said that the finance ministry’s revenue department will notify the duty cut in less than six months.
“There’s time up to 180 days…Customs will decide the appropriate time,” a person aware of the matter said.
The announcement came as part of the last or the seventh trade dispute between the two nations at the WTO over poultry imports from Washington. The development came in less than three months after Modi’s visit to the US in June, when both countries decided to square-off and close six out of the seven outstanding disputes at the WTO.
As far as the seventh is concerned, India, in 2015, had lost a long-standing dispute over poultry imports–mainly chicken legs–from the US.
The person cited above said the rationale behind agreeing upon the tariff cuts on additional food items is that not only the dispute that India lost at various stages at the WTO is laid off, the US can get some market access on items that are not very popular in India.
“It is unlikely to hurt the domestic market; it’s a niche, exclusive market that caters to a limited segment that wants to buy international products. It will be the consumers’ choice,” the person explained.
For instance, India is not a major producer of blueberry and is dependent on import of the fruit to meet its local needs. The US, on the other hand, is the largest producer of blueberries in the world and has been trying to tap the Indian market. In the past, US-based farmers and exporters’ body US Highbush Blueberry Council has said that it had been working with importers and trade associations in India to help reduce the 30 per cent import duty.
Arpita Mukerjee, professor at Indian Council for Research on International Economic Relations (ICRIER) said that import duty reduction of such products will be good for the hotel and food processors as well as the consumers. Items such as frozen turkey/duck, fresh/processed/dried blueberries and cranberries at the moment are niche products and they cater mainly to the high and the middle income consumers and hospitality sector.
“Besides, the channels through which the products enter the Indian market could be through organised retail or hotel chains and not through unorganised retail partners. As a result, despite the duty cut, the access of the product for the final consumer may not substantially increase and the final price depends on retailer margins,” Mukherjee said.
“Gradually, India will have to reduce high-tariff on agricultural/food items to facilitate agricultural trade, especially at a time when the country is trying to ink more free trade agreements,” she added.
As far as the bilateral trade between both nations is concerned, the US is India’s largest export market, with outbound exports at $78.5 billion in FY23. It is also the third largest import partner, after China and the United Arab Emirates, with inbound shipments amounting to $50.24 billion during the last financial year.
