Measures like market intervention schemes for remunerative prices, improved institutional support & comprehensive strategies to resolve value chain issues and addressing import surges are the key
An apple a day keeps the doctor away, but what if the apple industry itself is ailing? The Indian apple industry is facing multiple challenges, such as increasing input costs, inadequate infrastructure and unremunerative prices, among other factors. Farmers are also worried about the adverse impact on prices and income owing to import surges.
To tackle the challenges on the trade front, farmers are seeking a shield from imports through tariff hikes and other measures, such as the exclusion of apples from the free trade agreements (FTA). In this regard, it is imperative to analyse the emerging issues and available trade instruments to address the concerns regarding imports.
India has consistently been a net apple importer, with a trade deficit of US$363 million in 2021. In terms of volume, India imported 0.447 million tonnes which amounted to 17 per cent of domestic consumption in the same year.
The United States, China and Chile were the major sources of imported apples in 2015. This trend has changed significantly in recent years, with Iran, Türkiye, and Chile becoming the dominant players.
Between 2015 and 2021, the share of the US apple in India’s imports declined to five per cent from 55 per cent in terms of volume. It was due to a 20 per cent tariff hike on the US apples in 2019 — from 50 per cent to 70 per cent. The move was in retaliation to the imposition of high tariffs by the US on India’s steel and aluminium exports.
Additionally, the requirement of a non-genetically modified certificate by India has further negatively impacted US exports.
In 2017, India imposed sanitary and phytosanitary measures on the Chinese apple due to the presence of fungus and bugs. This restricted China’s market access in India, with its share crashing from 50 per cent in 2016 to nil in recent times.
Despite a sharp decline in imports from the US and China, apple imports in India doubled to 0.447 million tonnes in 2021 from 0.20 million tonnes in 2015. Resultantly, the share of imported apples in India’s domestic consumption has increased to 17 per cent from eight per cent during the same period.
The vacuum created by the US and China in the Indian market was filled by Iran and Türkiye, with their current share of 22 per cent and 17 per cent, respectively.
Irrespective of quality, both countries have a price advantage as apples imported from Iran and Türkiye were priced at $503/tonne and $830/tonne compared to $1158/tonne of the US in 2021.
Owing to the substantial increase in imports, Indian growers are demanding measures to mitigate the adverse impact of imported apples on farm income.
Being a WTO member, India cannot impose quantitative restrictions and raise tariffs beyond the maximum permissible bound level of 50 per cent on apple.
Given the domestic sensitivities, the applied tariff has been at 50 per cent for many years. Notably, the bound tariff for apples was reduced to 50 per cent from 55 per cent in 2003 to increase the bound tariff for products such as milk, wheat and rice under the Article XXVIII negotiations of the General Agreement on Tariff and Trade.
Under exceptional circumstances, India can raise tariffs beyond 50 per cent by using remedial trade instruments in the form of anti-dumping, countervailing and safeguard duties to mitigate the impact of dumping, subsidies and import surges, respectively.
For this, the causal relationship between imports and injury to the domestic apple industry is to be established. This requires information on over a dozen relevant economic factors, including sales, profit and market share. Thus, there is a need for an efficient mechanism to collect data from the apple growers on such variables.
Trade remedies are difficult to invoke compared to special safeguards (SSG) under the agreement on agriculture, which does not require proof of injury. In case of import surges or dips in domestic prices, the SSG can be used to raise tariffs beyond the bound level to protect domestic producers. Only a few countries are entitled to use the SSG; unfortunately, India is not one of them.
Therefore, India, along with other developing countries, is proactively demanding an SSG-like instrument, namely a special safeguard mechanism (SSM), in the WTO agricultural negotiations to protect farmers from import surges. However, India has no recourse to this instrument as consensus on this issue has remained elusive at the WTO.
Apple growers in India strongly oppose the import of apples at a preferential rate of less than 50 per cent under the FTAs.
Given the domestic sensitivities, apple should be on the exclusion list in future FTAs negotiations. Indian farmers are increasingly concerned about the influx of Iranian apples at low prices.
Notably, Iran is not a WTO member, so India has full flexibility to impose quantitative restrictions and high tariffs on Iranian apples. Addressing internal and external challenges is crucial to ameliorating apple farmers’ difficulties.
In India, apple farming is concentrated only in Jammu and Kashmir, Himachal Pradesh and Uttarakhand, unlike many other countries where apples can be grown anywhere.
Since these are hilly areas, farmers have to confront many difficulties like inadequate warehousing facilities and logistical and marketing inefficiencies, among many others. Unfortunately, the productivity in India is also significantly lower than its international competitors. These factors hinder farmers’ access even to the domestic market at a competitive price.
To mitigate the challenges faced by apple growers due to import influx of apples at significantly low prices, recently, the Indian government has prohibited the importation of apples below Rs 50 per kg.
Overall, measures like market intervention schemes for remunerative prices, improved institutional support, comprehensive strategies to resolve value chain issues, and addressing import surges can go a long way to make the apple industry competitive and economically sustainable.
Views expressed are the authors’ own and don’t necessarily reflect those of Down To Earth
Authors work at the Centre for WTO Studies, Indian Institute of Foreign Trade.
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