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FOWL PLAY

A chicken war shows all that’s wrong with India-US bilateral trade

REUTERS/Randall Hill
Meat in the middle
Published This article is more than 2 years old.

A particular thorn in the flesh for India-US ties has been the poultry trade. From 2007, India does not allow American poultry into the country, citing concerns of avian influenza. America argued that there could be no countrywide ban based on avian influenza concerns. When India refused to budge, the US took the case to the WTO in 2012. On June 19, 2015, the organisation ruled against India. America has moved the WTO again, alleging noncompliance by India and seeking permission to impose a penalty tariff on imports from the country.

By mid-2018, India relented and began allowing the import of chicken parts from America, though in small quantities. The last word on this has not been said yet, however. Politics in America and India are both unsupportive of trade in goods, but the poultry trade is a curious example—it could be seen as how economies around the world could complement one another through trade or how developing markets become a tool for advanced markets. Also, how avoidable disputes could damage symbiotic relationships.

A little digression into America’s global chicken presence shows us why trade cannot merely be understood in terms of surpluses or deficits, a point hyper-nationalist politics often does not appreciate. The US is the world’s largest chicken producer and its chicken consumption per capita—now at 91 pounds—has increased nearly every year since the mid-1960s, while red meat consumption has steadily declined.

Nineteen per cent of its poultry produce is exported. It is estimated that Americans eat chicken ten times a month, but not more than twice do they eat chicken thighs or drumsticks. They prefer chicken breasts, a culinary habit that formed when chickens were raised in farms and their legs and thighs were more muscular.

[…]

Since culinary preferences decided by culture vary across the world, the parts Americans do not want have a huge market abroad, and the expansion of global trade allowed chicken farmers to access these markets. Chicken feet are a delicacy in China, and chicken legs are considered superior in Russia as well as in India.

In 2008, America exported $854.3 million worth of chicken meat to China and Hong Kong, half of it feet and wings.

[…]

The Indian poultry industry is up in arms and they fear American dumping into the Indian market would kill the sector. However, given the vast untapped potential of the Indian market and the throwaway price at which chicken parts could be bought from America, there could be a creative solution to this issue. Trump has spoken about the restrictions in India on US-manufactured, high-end motorcycles and his officials have named several Indian companies for allegedly misusing H-1B visas, but nobody has spoken about the chicken dispute.

Trade wars

The issue is not under the radar and America’s formidable trade bureaucracy has detailed this, along with a litany of other issues they think amounts to India denying legitimate market access to America’s products and services, in the USTR National Trade Estimate for 2017 under “Foreign Trade Barrier.”

“The Indian poultry industry is up in arms and they fear American dumping into the Indian market would kill the sector.”

Trump indeed raised these concerns with Modi when they met. “I look forward to working with you…to create a trading relationship that is fair and reciprocal. It is important that barriers be removed to the export of US goods into your markets, and that we reduce our trade deficit with your country,” he said during his Rose Garden appearance with Modi.

[…]

The Trump administration’s drive to reduce American trade deficit has brought India into sharper focus. India is the ninth biggest trading partner of the US and had a trade surplus of around $23 billion with the US, in goods and services combined.

[…]

The President’s National Trade Policy Agenda for 2017 said, “In 2016, voters in both major parties called for a fundamental change in direction of US trade policy […] because they did not all see clear benefits from international trade agreements. President Trump has called for a new approach, and the Trump Administration will deliver on that promise.”

It reiterated Trump’s four-point campaign agenda—”defending national sovereignty over trade policy, strict enforcement of US trade laws, using leverage to open foreign markets and negotiating new and better trade deals.” The US respects decisions by the WTO when they are in its favour and rejects the rest, the Trump administration has declared.

[…]

India asserts itself

But strident nationalism is visible in India on trade matters too. An ongoing point of stress between India and the US is Apple’s attempt to sell refurbished iPhones in India. In 2000, China banned the import of remanufactured electronic items in order to protect its domestic industry. India permits the importation of electronics only for recycling. Exporting used electronics and cars to foreign countries is helpful for the working of the American economy—to keep its own manufacturing and commerce running.

[…]

The US demand for the tightening of India’s intellectual property rights (IPR) regime is louder under Trump. The US trade representative’s office brings out an annual Special 301 Report, which is a stocktaking of intellectual property protections across the world. It categorises countries based on Section 301 of the US Trade Act of 1974, hence its name. India is routinely criticised in this report.

New Delhi never cooperates with its preparation as it considers the report a unilateral measure by the US to exert undue pressure on India. In the wake of Modi’s coming to power, there was much speculation in the US by his pro-market supporters that he would dismantle India’s existing IPR regime.

In July 2017, however, (India’s defence minister Nirmala) Sitharaman told Parliament that in this issue, the Modi government would follow the UPA government’s policy—that the Special 301 Report issued by the US was a “unilateral measure” to pressurise countries to enhance IPR protection beyond WTO rules. The WTO has its own dispute settlement mechanisms, and India and the US have wrestled in that system on and off. But the USTR continues to keep its own process, which India finds problematic.

[…]

IPR is an issue that American companies, more than its workers, are agitated about. Modi’s nationalist politics would not exactly like to allow foreign companies to profiteer off Indian consumers; and his populist politics would require providing affordable pricing for Indians. Over the last two years, American medical companies and the Indian government have been locked in multiple regulatory issues, the most important of them being the prices of artificial stents used in human hearts.

[…]

“Trade cannot merely be understood in terms of surpluses or deficits, a point hyper-nationalist politics often does not appreciate.”

The price restrictions imposed by India on medical devices imported from America and the Indian government’s position that certain types of international companies must keep the data of Indian consumers on servers physically located in India have riled up the trade bureaucracy and companies in America.

These decisions by the Modi government are all in line with the strident nationalism of the Hindutva doctrine. Price control on medical devices is a typically sensitive topic for America. The US policymakers believe that if the Indian model of price restrictions is allowed to stand, other developing countries will follow suit.

In June 2018, India announced its decision to increase import tariffs on thirty items from the US. Under the Buy American, Hire American policy of the Trump administration, nearly 100,000 Indians who are currently in America as dependent spouses of H-1B visa holders are at risk of losing their work authorisation. The H-1B processing system itself has been tightened already, with frequent hold-ups, review of each renewal application of the visa as if it were a fresh application, etc.

Excerpted with the permission of Penguin India from Open Embrace: India-US ties in the age of Modi and Trump by Varghese K George. We welcome your comments at ideas.india@qz.com.

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