WTO and Poultry Industry in India
Dr Rajesh Mehta, R. G. Nambiar and Sujit Ray |
Prior to the 1990s’ reforms, India's foreign trade regime was highly complex and cumbersome. There were different types of import licences, depending on their actual use. Import of agriculture and poultry items was, for instance, subjected to import licensing. Their imports were permitted under the recommendation of different departments of Government of India. But after the commencement of economic reforms in the 1990s, the government placed the whole range of poultry products under the category of Open General Licence (OGL), also called the 'Free List'.
The move to remove all Quantitative Restrictions (QRs) and instead place them in OGL, raises several questions: What are the implications of the removal of Qualitative Restrictions to the domestic poultry industry?; How would this shape the growth of domestic poultry industry? and What kind of policies are warranted during this transitional phase so that the domestic poultry industry faces no serious adjustment problem?
The main objectives of this paper are:
(i) to outline some salient features of Indian poultry industry,
(ii) to review the process of dismantling QRs and other trade restrictions on poultry imports and
(iii) to draw lessons from experience of other countries who had sought to open up their poultry sector.
Indian Poultry Industry
Introduction
Among different activities in the livestock sector, poultry farming is the fastest growing. What was once started as a novelty in the 1970s -- egg and broiler production -- has now turned out to be a highly organised agribusiness with an estimated capital investment of Rs.100 billion, contributing Rs.110 billion to the gross national product (GNP), and employing around 1.5 million people, mostly in rural areas. In 2003-04, India produced 40.4 billion eggs (and ranked fifth in the world), and 1,715,000 metric ton of poultry meat (G.O.I., Economic Survey, 2004-05; FAOSTAT Website).
Broiler production has also accelerated at an annual growth rate of about 15 per cent, and currently stands at about 1000 million broilers. The poultry sector is able to contribute 12 per cent to 15 per cent of agricultural gross domestic product and drive the growth of agriculture and allied sectors. Table 1.1 displays the growth in egg production during 1991-2002.
Table 1.1: Growth of the Indian Poultry Sector, 1991-
2002
| Production |
1991 |
2002 |
| Total Egg Production (million) |
22743 |
39092 |
| Per Cap
ita Egg Consumption (No) |
25 |
39 |
| Per Capita Poultry Meat Consumption (Kg) |
|
0.76 |
| Source:Poultry Times of India
, various issues; Dept. of Animal Husbandry, GOI |
Figure 1.1 illustrates the increase in poultry meat production in 2004 to a volume of nearly 1715000 metric tonnes. Table 1.2 shows that, apart from increases in volume, poultry meat also increased its market share in meat production. Based on volume, poultry meat has emerged from the smallest meat sector in 1977 to the third largest meat-producing sector in 2000, after the leading meat sectors of veal and buffalo.
| FAOSTAT Website (Food and Agriculture Organization of the United Nations) |
Table 1.2: Market shares of various meats in Indian Meat Production, 1978-
2000
(Percentage share based on Quantity)
| |
Beef and
Veal |
Buffalo
meat |
Mutton
Lamb |
Goat Meat |
Pork Meat |
Poultry Meat |
| 1978 |
34 |
34 |
6 |
12 |
10 |
4 |
| 1990 |
34 |
28 |
5 |
11 |
10 |
9 |
| 1995 |
32 |
31 |
4 |
10 |
10 |
11 |
| 2000 |
31 |
30 |
5 |
10 |
12 |
12 |
A peculiar feature of the poultry industry in India is that it is highly fragmented. There are several thousand independent poultry producers. There is little or no promotion of brands either in the egg or chicken meat sector. There are also significant variations in poultry development across regions. The four southern states -- Andhra Pradesh, Karnataka, Kerala and Tamil Nadu -- account for about 44 per cent of the country's egg production. The eastern and central regions account for about 20 per cent of egg production with a per capita consumption of 18 eggs and 0.13 kg. of broiler meat. The northern and western regions record much higher figures than the eastern and central regions with respect to per capita availability of egg and broiler meat. Table 1.3 shows the status of the poultry industry across the states of India.
Table 1.3: Egg Production in Indian States, 2001
-
02
| State |
Production
lakh nos.) |
State |
Production
(lakh nos.) |
| Andaman & Nicobar |
470 |
Madhya Pradesh |
15454 |
| Andhra Pradesh |
63160 |
Maharashtra |
32488 |
| Assam |
403 |
Manipur |
873 |
| Bihar |
5577 |
Meghalaya |
975 |
| Chandigarh |
15656 |
Mizoram |
340 |
| Dadra & Nagar Ha
veli |
336 |
Nagaland |
544 |
| Dadra & Nagar Ha
veli |
67 |
Orissa |
11725 |
| Daman & Diu |
34 |
Pondicherry |
101 |
| Delhi |
806 |
Punjab |
33461 |
| Goa |
1176 |
Rajasthan |
5913 |
| Gujarat |
6921 |
Sikkim |
202 |
| Haryana |
11661 |
Tamil Nadu |
36989 |
| Jammu & kashmir |
873 |
Tripura |
739 |
| Jammu & kashmir |
4872 |
Uttar Pradesh |
9978 |
| Karnataka |
23248 |
Bengal |
30572 |
| Kerala |
24659 |
|
|
| Lakshadweep |
67 |
|
|
| source:G.O.I., Department of Animal Husbandry |
Significance for the national economy
Recent studies suggest that the poultry sector has an enormous potential to improve the socio-economic status of rural population. Poultry farming is labour-intensive, requires minimum capital, and ensures quick returns. It thus helps to improve the quality of rural population. Estimates show that it can create as many as 25000 additional jobs on the consumption of one more egg per head, and 20,000 additional jobs on the consumption of 50 grams of more chicken meat per head. It has tremendous potential to create non-farm employment, and check migration from rural to urban areas.
Besides this, India has also great potential to exploit the international market. Owing to the strong agrarian base, India is favorably placed for poultry production. Although India's current share in world trade is small, in the emerging global trade, the Indian poultry industry has great potential. Table 1.4 shows India’s relative position in world production and trade of poultry products.
Table 1.4: Status of India's Poultry Industry in World
| World poultry meat production
1
(2004) |
78225231 Mt |
| India's poultry meat production (2004) |
1715000 Mt |
| India's share in world production
(2004) |
2.19 percent |
| World poultry meat exports2
(2003) |
10109913 Mt |
| India's poultry meat exports3
(2003) |
6918 Mt |
| India's share in world total (2003) |
0.07 per cent |
Notes:
1. Main producing countries: USA (23%t), China (17%), EU (11%), Brazil (11%)
2. Main exporting countries: USA (28%), EU (29%), Brazil (21%t)
3. Main importing countries: EU (24%), China (7%t) |
| Source:FAOSTAT Website (
Food and Agriculture Organization of the United Nations) |
Problems faced by the poultry industry
The domestic poultry industry has been facing a severe shortage of its major feed ingredient, namely maize. Feed cost amounts to nearly 75 per cent of the cost of production of eggs and broilers; and maize constitutes 50 per cent of feed rations. Therefore, even a small increase in the price of ingredients can wipe out the profits. If the growth of the poultry sector is to be sustained at 10 per cent for the layer sector and 15 per cent for broilers, the country needs to push up availability.
Poultry, being a livestock sector, needs certain vital infrastructure facilities that can facilitate storage, distribution, marketing, and exports. There is an acute shortage of refrigerated road transport and an efficient cold chain, which makes widespread distribution difficult and expensive. The country does not have a proper testing system; presently issues like pesticide residue, antibiotic residue, and hormonal residues are creating enormous problems while exporting.
Although poultry is an integral part of agriculture and treated at par with livestock in India, it faces restrictions on use of agricultural land, attracts higher electricity tariffs and sales tax than that of agriculture, pays tax on income earned from poultry farms, and is subjected to different land/labour laws including the Minimum Wage Act.
In India there is no tradition of processed poultry in which the poultry is frozen which provides higher shelf life to the poultry. This leads to wide price fluctuations thus impacting the profitability of poultry farms. Lack of vertical integration of poultry industry is another important problem Indian poultry industry is facing.
While some of the traditional economic problems are still persisting, new areas of concern have cropped up. The foremost is the reported move of the government to open up the domestic poultry sector for import competition. For long, the domestic poultry sector has remained protected because its import was subject to Quantitative Restrictions (QRs). Most of these items were imported after obtaining licences. Processed poultry meat preparations and egg products attracted an effective import duty of 30 per cent1. Though the duty has increased in the last four years, imports were subject to quantitative restrictions till April 2001.
Trade Liberalisation and WTO
India's custom tariffs have been consistently declining since the adoption of the reform process in the early 1990s. The average (simple) MFN custom duty rate has declined consistently and significantly from an average of 80 per cent or more in the early 1990s to an average of around 24 per cent in 2004-05.
There has also been a decline in the peak tariff2 of Indian custom duty rates during mid-1990s and early 2000s. For non-agriculture items, it declined significantly from more than 100 per cent during early 1990s to around 20 per cent in 2004-05. After the removal of Indian QR regime, the custom tariffs will emerge as the crucial trade policy instrument.
What is the present state of India's QR regime? In the pre-reform period, India's QR regime was complex and highly cumbersome. Imports of almost all commodities and goods, except especially permitted (sometime called commodities under Open General Licence), were restricted and they could be imported against a licence. The items that can be imported under the open general licences are sometimes called 'Free'. In the pre-reform period, the total number of goods and commodities, falling under open general licence category was less than 10 per cent of all commodities/lines.
In the post-reform period, the coverage of open general licence has been enhanced. Table 2.1 gives the number of items/lines that have been categorised under open general licence or 'Free' from 1995-96 onwards. One can notice from this table that India has been consistently removing its QRs for the last couple of years. Although dismantling of the QRs was started by India on unilateral basis during mid 1990s, most of the QR removals during 1997-2001 were due to dispute settlement proceedings of the WTO3.
Table 2.1: India's Imports Subject to QRs, 1995-
2004
| Year |
Number of Lines, which are Free
(as per cent of total number of lines*) |
| Apr.1995 |
56.00 |
| Apr.1997 |
65.80 |
| Apr.1998 |
70.20 |
| Apr.2000 |
86.41 |
| Apr.2001 onwards |
94.37 |
* At 8 or 10 digit HS level.
Sources of data:
(i)Mehta, R. (1997), Trade Policy,1991-92 to 1995-96:
Their Impact on External Trade, Economic and Reforms,Political Weekly, April 1997, pp.779784
(ii) Mehta, R. (1999),Tariff and non-Tariff Barriers of Indian Economy: A Profile , RIS.
(iii) Mehta, R. (2000), Removal of QRs and Impact on India's Import, Economic and Political Weekly,
Vol.XXXV, No.19, May 2000.
(iv) Goldar, B.N. and Mehta, R. (2001),The Budget and Customs Duties, Economic and Political Weekly, Vol.XXXVI, No.12, March 2001. |
Tariff rates of poultry products
The tariff rates of different poultry products for the recent financial years 1999/2000, 2001/2 and 2004/5 are given in Table 2.2. Most of the products listed were ‘restricted items’ before 1999/2000. In 1999/2000, the tariff rates ranged from 15 per cent (of meat and edible offal) to 40 per cent (of live poultry and food preparations of poultry products). During the same year, tariff rate of 'maize for use for poultry feed' was 0 per cent. But in the budget proposal of 2000-01, the rate was hiked to 70 per cent. However, with the adoption of tariff quota regime, the rate has been brought down. All other products of the poultry sector attracted a tariff rate of 35 per cent4 during 2001/02. In the import policy of 2001/02, QRs on all poultry products were dismantled.
In the budget proposals for 2000/1, the government had proposed 35 per cent tariff rate for items of the poultry sector (and items of other sectors) whose QR is removed. It is difficult to rationalise that the tariff-equivalence of QRs for all the items is 35 per cent, if the government wants to accord the same level of protection to all5. It seems that the government realised this anomalous situation and revised the tariff rate from the level of 35 per cent to 100 per cent for two commodities of the poultry sector6: HS 1601.00 (sausages and similar products of meat, meat offal, food preparations based on these products) and HS 1602.32 (other prepared or preserved meat of fowls of species; of poultry products). This leaves us to speculate that either (i) the government believes that the tariff-equivalence of most of poultry products is close to 35 per cent7, or (ii) the government wants to import the products of this commodity group by opening trade. This commodity group contains a large number of prepared and preserved meat. It is difficult to rationalise that only commodity groups defined by HS 1601.00 and HS 1602.32 have a tariff equivalent of 100 per cent, while the commodity HS 1602.39 has tariff-equivalence of 35 per cent.
In the Uruguay Round, a large number of countries fixed the level of tariff bindings, after estimating the tariff equivalence of QRs. India (and many other developing countries) probably fixed the bound rates without examining their tariff equivalence; and did it mostly because a large number of our imported commodities were subject to QRs. Hence, it is not wrong to realise that the binding rates for a large number of commodities were not necessarily tariff-equivalence rates.
Implication for the poultry sector
What effect will this unfettered free trade regime have on the local poultry industry? There has never been serious discussion on its underlying effects. What can be inferred from the available indications is that the local industry would not be able to survive in an open trade environment. The new regime would lead to reckless cheap imports, a glut in the domestic market, and un-remunerative prices to local producers the local producers may be forced to pack up and leave the field. The domestic industry is price competitive only in eggs. However, some studies have shown that India's 'whole chicken' and chicken products does not show much competitive advantage over other suppliers. The price in India of whole chicken is around 30-40 per cent higher than the import price of Brazilian chicken. In addition, it should be noted that there is not much significant difference in prices of different cuts of chicken in India, while the prices in other countries vary significantly for different cuts, like breast meat, thigh meat and leg quarters. There are several reasons why local poultry products are relatively expensive compared to imported products.
First, there is a big difference in the size of poultry farms operated here and abroad. In India, there are about 1 million poultry farmers of whom 95 per cent have 500 to 5000 birds. Anyone here who keeps 50,000 birds and above is considered a big farmer. But in the United States, an average poultry farmer maintains a flock of 0.4-0.5 billion birds.
Second, a farmer in India has to buy maize feed (for poultry) at relatively higher price. Since the feed cost accounts for nearly 75 per cent of the cost of production of eggs and chickens, the relatively higher price of maize in India leads to higher costs of production.
Third, U.S. and European poultry processors are said to earn their profits by selling the breast portion of chicken, which is conveniently promoted as lean/white meat at a premium price of around US$3 per pound (or Rs. 250 per kg) in their own markets. The leg portion (the leg quarter), on the other hand, is treated as dark meat and is targeted for dumping in Asian markets at a throwaway price of 20-25 cents per pound (i.e. around Rs.35 per kg). In the Indian market, the thigh and leg quarter is considered a delicacy and is preferred over the breast portion. Therefore, when the local markets are dumped by imported leg quarters at throwaway prices, local producers are definitely going to be hurt.
 |
Fourth, foreign governments, especially the U.S. and EU, support poultry exports with subsidies such as the Restitution Money Scheme of the European Union, and the Export Enhancement Scheme of US. The amount of subsidy works out to be more than 25 per cent of the domestic price in EU, and 40 per cent in the U.S. The result is an unequal playing field in which the ball inevitably bounces towards the Indian goal.
UR: Tariff Bindings and Sanitary Measures
Tariff bindings
In the Uruguay Round negotiations, India had agreed to bind (and reduce) tariff rates for 3373 commodities at 6-digit level or commodity sub-groups of 6-digit HS level8. The bound commodities account for around 65 per cent of India's total tariff lines9. As far as agriculture commodities (or lines) are concerned, India has committed to bind rates of all the lines. India has basically three bound rates for agriculture sector: 100 per cent for raw material, 150 per cent for processed agro-commodities, and 300 per cent for edible oil. The concerned reductions, wherever needed, will be done in equal installments beginning from March 1995 to March 200410. However, the bound rates for a number of agriculture commodities are low and, in a few cases, even zero, the range varying between 0 and 55 percent11. These were owing to commitments made by India in the earlier rounds (earlier than the Uruguay Round) of negotiations. Thus, it includes some poultry products where bindings have been made in earlier rounds.
During 1999/2000, India has successfully renegotiated the binding rates on products with 'principal supplying interests'. The negotiations have been conducted mainly for those agriculture commodities whose binding have been made at rounds earlier than the Uruguay Round. Under Article 28 of GATT, India had agreed to keep its import duty on some agriculture items at 0 per cent as India was a food deficit country when the pact was signed. India had not bothered to change the rate of import duties of these commodities in the Uruguay Round, probably because it was following the QR regime. The renegotiated agreement would enable the country to change the import duty on 17 items such as rice, spilt wheat, skimmed milk powder, sorghum, jawar, maize, etc. The deal was a part of a trade-off with agriculture exporting countries under which India has given more access on other items by decline/restructure in tariff bindings like groundnut oil; or developed countries would be allowed to raise their bound tariffs on certain items. India had to begin renegotiations of the bound rates with principal suppliers of the commodities in the light of removal of QRs. It began bilateral negotiations with principal supplying countries of WTO, following sharp increase in import of skimmed milk powder, which was estimated to be around 18000 tonnes between April and October 1999, as compared to import of 2000-3000 tonnes during the same period in 1998.
India has made tariff bindings for all the commodities of the poultry sector. The bound rates for different commodities of the poultry sector are given in Table 2.2. The range of tariff binding rates varies from 35 per cent to 150 per cent. Most of the finished (consumer) goods of the poultry sector, i.e. items of commodity groups like ‘birds' eggs’, ‘sausages or other prepared meals’, etc. are bound at 150 per cent, except for items of commodity groups defined by HS 1602.10 (homogenised preparations), 1602.41 (hams and cuts thereof of swine) and 1602.42 (shoulders and cuts thereof of swine). The tariff rates of these three commodity groups of the poultry sector are bound at 55 per cent. Most of the items of 'live poultry' and 'meat, and edible offal of the poultry' are bound at 100 per cent. However, there are some exceptions in this category also. The commodity group defined by HS 0207.12 (meat, and edible offal of fowls of species Gallus domesticus, not cut in pieces, frozen) and a sub-group of HS 0207.34 (Fatty livers, fresh or chilled of duck and geese) are bound at the rate of 35 per cent. The bound rate of maize, a vital input of poultry sector, was fixed at 0 per cent in the UR. India did successfully renegotiate, in early 2000, raising the bound import duty on maize and other range of agriculture products with 'principal supplying interests'. The new bound rates would be applicable uniformly to all the countries as per the MFN principle of WTO.
Sanitary barriers
The importance of product standards in domestic and international business transactions can hardly be over emphasised. National governments often lay down health and safety standards for various products to protect consumers. Standards are usually established to protect the environment and natural resources. Standards are also indispensable in international business transactions because they ensure a uniform level of quality in merchandise, and reduce disputes over specifications and quality of goods exported or imported.
Many countries restrict import of agricultural products, particularly plants, fresh fruits and vegetables, meat and meat products, and other prepared foodstuff on the grounds of sanitary and phytosanitary regulations.
Until UR, international rules applicable to sanitary and phytosanitary measures fell within the scope of the agreement called Technical Barriers to Trade (TBT). The TBT agreement, also called the ‘standard code’, resulted from the Tokyo Round of Multilateral Negotiation. This agreement permitted its signatories to introduce sanitary and phytosanitary measures in the pursuit of legitimate objective, for example, the protection of human, animal, or plant health, the protection of environment, animal welfare, and national security motives.
When negotiations during the Uruquay Round led to lowering of trade barriers, some countries felt that the trade barriers may be circumvented by disguised protectionist measures in the form of sanitary and phytosanitary regulations. This concern ultimately led to signing of a separate agreement on the application of sanitary and phytosanitary measures in parallel with the Agreement on Agriculture. In fact, the two agreements are complementary.
One of the objectives of the SPS agreement was to reduce the possible arbitrariness of sanitary and phytosanitary measures. The agreement specifies principles and rules which member countries must follow in regulating imported products. The agreement defines sanitary and phytosanitary regulations as measures taken to protect human, animal, or plant life and health.
The SPS agreement requires countries:
to base their SPS regulations on international standards, guidelines and recommendations
to play a full part in the activities of international organisations like the CODEX, International Plant Protection Convention, etc. in order to promote the harmonisation of SPS regulations on an international basis.
While the SPS agreement has much in common with its predecessor, i.e. the TBT agreement, there are two major differences.
1. The TBT agreement requires product standards to be applied on a MFN basis. The SPS agreement, on the contrary, permits standards to be applied on a discriminatory basis, so long as they do not arbitrarily discriminate between members. The rationale behind this discriminatory treatment in SPS is that it is not appropriate to apply same sanitary and phytosanitary standards on animal and plant products originating from different countries because the incidence of pests or diseases and food safety conditions differs owing to climatic differences.
2. The SPS agreement provides greater flexibility for countries to deviate from international standards than is permitted under the TBT agreement. The TBT agreement, for instance, allows a country to deviate from international standards only if it can be justified on scientific or technical grounds. The SPS agreement, on the other hand, states that a country may introduce or maintain a SPS measure resulting in a higher level of SPS protection than that achieved by an international standard if that country determines to have a higher level of protection.
Resorting to sanitary and phytosanitary measures provides yet another safety valve for countries to shield domestic industries from unfair competition. Regrettably, India does not have detailed food safety standards for its poultry products (except eggs) at present. As a result, India cannot regulate imports of poultry products from major exporters. At the same time, India can also not export poultry products to major trading partners, because the latter have not recognised India's food safety standards12.
State Supported Measures in Select Countries
As mentioned earlier India's economic reform, launched in the 1990s, has placed the industry in a different situation. From the 1950s to the late 1990s, the indian poultry industry operated in a highly protected market. However, this environment has changed drastically after 1990. This section draws lessons from international experience, i.e. how governments in other countries have designed ways in WTO, to protect their industry, directly or indirectly. Toward that proximate goal we investigate the state support to the industry in the form of production and export subsidies.
Production subsidies of select countries
An important outcome of the Agreement on Agriculture under the Uruguay Round is the institutionalisation of developed countries' subsidies. The agreement committed developed countries to cut their agricultural production subsidies by 20 per cent and export subsidies by 36 per cent over ten years. However, even after this reduction, the subsidies continue to remain high because the 'Green Box' provision of agreement allows direct income subsidies to farmers on the grounds that these are 'decoupled' from production and thus 'non-trade distorting'. In fact, subsidies to agriculture provided by the direct income support mechanism are enormous. A United Nations Development Programme (UNDP) estimate places the subsidy per farmer in the United States to US$ 29,000 in 199513 -- a figure that is several times the per capita income of developing countries like India.
Table 3.1 exhibits total Aggregate Measure of Support (AMS) and product specific domestic support in terms of both committed and actual for poultry products in select countries. Product-specific domestic support includes market price support, non-exempt direct payment, and other product-specific support. An examination of this data shows the following:
Both committed and current level of AMS, whether total or product specific has fallen over time for Australia, Brazil, Canada, and Korea. However, the total amount of AMS is still significant-the United States alone gave AMS of US $ 6.2 billion in 1997.
For the Philippines and Thailand, AMS is found to have increased over time.
It should be noted that a large part of the total AMS is of non-product specific, hence that support does not get reflected in product specific AMS. For example, product specific AMS for poultry meat or chicken will not be reflected in the domestic support given through non-product specific amount.
Although the current level of total AMS of Japan has declined from 1995 to 1997, AMS for eggs has increased from 1.2 billion yen in 1995 to 1.6 billion yen in 1996 (and 1997).
To illustrate how much of price support (sometimes known as price subsidy) these countries offer per unit production of different poultry products, we show in Table 4.2 the market price support for select poultry products in select countries. In 1997, Switzerland's price subsidy to poultry products works out to 60 per cent - for instance, the applied administrative price (which is close to production cost) of one tonne of poultry was Sw F 3997 while the external reference price (which is close to the domestic market price) was Sw F 673 per tonne. Hence, Switzerland gave a domestic price support (or price subsidy) of Sw F 3324 (=3997-673) per tonne (US$ 2290 per tonne). In other words, the external reference price was one-sixth of the applied administrative price.
The ratio of applied administrative price to external reference price is quite high ranging from 2.53 to 8.30 for different poultry products/eggs in different countries (see Table 3.2). Further, the table shows that the magnitude of price support has been increasing over time in some countries. For example, the price support for poultry meat of Iceland in 1998 is ISK 822.2 million as compared to ISK 636.3 million in 1997.
Export subsidies of select countries
Out of 136 WTO members, 25 countries have made export subsidy reduction commitments in the Uruguay Round. These commitments have been made for: (i) total agriculture and (ii) product-specific commitments in many product groupings. The numbers of product groupings vary from country to country. Member countries have made commitments on: (i) budgetary outlay and (ii) volume basis. The total number of groupings of volume-commitments (product specific) is less than the number of groupings of budgetary outlay commitments. All member countries, including those, which have no export subsidy reduction commitments, have to notify the quantum of export subsidy to WTO.
 |
 |
 |
Table 3.3 presents information pertaining to export subsidy offered by select countries to poultry products poultry meat and eggs. The table provides information on both the committed and actual outlay, and a further break down of each in terms of budgetary outlay and volume outlay, wherever such details are available. In the case of some countries/products, for instance, only the amount of budgetary outlay is reported, not the actual outlay. A few interesting observations emerge from the table:
Budgetary outlay, whether committed or actual, has declined, with the result that the 1998 budgetary outlay is below the 1995 outlay. However, the quantum of export subsidy is still high.
The quantum of actual budgetary outlay is less than the corresponding committed level for select poultry products of different years. However, there are some exceptions in the case of volume-commitments. There are instances where the quantum of actual volume outlay is more than the corresponding committed level. For example, EC gave away export subsidy to 393700 tonnes of poultry meat as against its commitment to 375100 tonnes in 1997. This is also true of eggs in 1998.
The discussion until now was confined only to aggregate export subsidy. How much is the export subsidy per unit of select poultry products? To shed some light on this, we have sought to work out actual export subsidy per unit of select poultry products. This data is reported in Table 3.4 for select countries. The quantum of export subsidy per unit has tended to increase over time. For example, in the United States it is US $ 394.74 per tonne in 1998 as against US $ 231.60 in 1995, for 'poultry meat'. Similarly, the amount of export subsidy offered by EC to eggs has gone up from ECU 135.65 per tonne in 1995 to ECU 151.49 in 1998, and to poultry meat has gone up from ECU 181.86 per tonne in 1996 to ECU 261.21 per tonne in 1998.
Table 3.4: Actual Export Subsidy per unit of Select Poultry Products in Select Countries
| Country |
Product |
Unit |
1995 |
1996 |
1997 |
1998 |
European
Commission |
Poultry
Meat |
ECU/tonne |
277.21 |
181.86 |
193.29 |
261.21 |
| US $/tonne |
362.61 |
230.60 |
219.22 |
295.17 |
| Egg |
Mill. ECU/Tonne |
135.65 |
101.62 |
125.24 |
151.49 |
| US $/tonne |
177.44 |
128.85 |
142.04 |
171.18 |
| US |
Poultry Meat |
US $/tonne |
231.60 |
0/0 |
* |
394.74 |
| Eggs |
US $/tonne |
** |
0/0 |
N.R. |
N.R. |
* Value of budgetary actual outlay is US $ 862500, while volume is reported 0, as reported to WTO
** Value of budgetary actual outlay is reported 0, while volume reported to WTO is 7565500 dozen
1. Based on Annual Average Exchange Rate
N. R. Not Reported
Same as Table IV.3 |
Tariff quota
As mentioned earlier, the market access commitment is one of the major achievements of the Agreement on Agriculture (AoA) in the Uruguay Round (UR). As a part of this process, AoA entailed conversion of all non-tariff barriers (NTBs) into equivalent tariff barriers, which is sometimes referred to as tariffication. Apart from the tariffication of NTBs, UR negotiations led to a reduction in the base tariff under a time bound programme by 24 per cent (average) over ten years in the case of developing countries and by 36 per cent (average) over six years for developed countries. In addition to this, it was also decided to maintain current access opportunities and establish a minimum access tariff-quota. The minimum access of tariff quota was to be established at reduced tariff rate for those basic products where minimum access was less than a proportion of domestic consumption in the base year14. Minimum access import quota must be equal to 1 per cent of domestic consumption for developing countries (3 per cent for developed countries), increasing to 4 per cent by 2004 (5 per cent by 2000 for developed countries). The tariff quotas were fixed at reasonable levels on tariff-line-by-line basis with the objective of facilitating market access. In the Uruguay Round, 36 member countries opted for tariff-quota on 1371 lines15 (or commodities).
Table 3.5: Number of Tariff Quotas by Member
countries, committed in WTO, 1999
| Country |
No. of Lines ( or
commodities) |
Country |
No. of Lines ( or
commodities) |
| Australia |
2 |
Mexico |
11 |
| Barbados |
36 |
Morocco |
16 |
| Brazil |
2 |
New Zealand |
3 |
| Bulgaria |
73 |
Nicaragua |
9 |
| Canada |
21 |
Norway |
232 |
| Colombia |
67 |
Panama |
19 |
| Costa Rica |
27 |
Philippines |
14 |
| Czech Republic |
24 |
Poland |
109 |
| Ecuador |
14 |
Romania |
12 |
| El Salvador |
11 |
Slovakia |
24 |
| EC-
15 |
87 |
Slovenia |
20 |
| Guatemala |
22 |
South Africa |
53 |
| Hungary |
70 |
Switzerland |
28 |
| Iceland |
90 |
Thailand |
23 |
| Indonesia |
2 |
Tunisia |
13 |
| Israel |
12 |
United States |
54 |
| Japan |
20 |
Venezuela |
61 |
| TOTAL |
|
|
1368 |
Table 3.5 gives the number of lines with tariff-quota committed by different countries in UR. It shows that Norway made commitment for the maximum number of lines: 232. EC committed tariff quota for 87 lines in the UR, while the United States made commitment for 54 lines. A significant number of these commitments were made for poultry, egg, and egg products. WTO categorised the different lines of the tariff quota in 12 broad commodity groups (see Table 3.5). In this context, it should be remembered that different countries are following different administrative methods (Table 3.6) to fill tariff quotas.
Although the tariff-quota leads to provide a minimum market access for imports16, the high levels of over-quota tariff and stringent administration methods (for imports) do not allow imports above the quota levels.
In the Uruguay Round, India had not opted for tariff quota for any tariff line (see Table 3.5). The removal of India's QRs led to a significant increase in imports of select agriculture items. For example, skimmed milk powder imports increased from 2000-3000 tonnes between April and October 1998 to around 18000 tonnes during the same period in 1999. Since, India had no options to restrict increase in the level of imports, this forced India to renegotiate the binding rates and/or establishment of quota-tariff with 'principal supplying interests' like the United States, European Union, Canada and New Zealand in 1999/2000. India has successfully renegotiated this deal for 17 commodities. The renegotiated deal would enable the country to enhance the import duty, or establish tariff quota on select lines. In this context, it should be remembered that the deal was part of a trade-off with agriculture exporting countries, under which other developed countries were allowed to increase their market access in India for certain other items like edible oil.
Table 3.6: Principal Tariff Quota Administration Methods- Number of Tariff Quotas by Product Category, 1999
Product Categories =>
Administrative Method |
CE Cereals
|
OL Oilseeds |
SG
Sugar
|
DA
Dairy |
ME
Meat
|
EG
Eggs |
BV
Beverage |
FV
Fruit & Veg
|
TB
Tobacco |
FI
Fibers
|
CO
Coffee ,Tea,etc |
oA
Other |
All |
| Applied tariffs |
106 |
72 |
22 |
54 |
88 |
7 |
9 |
211 |
7 |
7 |
21 |
38 |
642 |
First
come, first served |
18 |
13 |
13 |
16 |
26 |
- |
11 |
26 |
1 |
7 |
14 |
2 |
147 |
| Licences on demand |
66 |
28 |
8 |
47 |
77 |
11 |
11 |
62 |
3 |
2 |
14 |
8 |
337 |
| Auctioning |
3 |
- |
3 |
18 |
18 |
