U.S. Trade Representative Ron Kirk has requested consultations with India under WTO dispute settlement provisions on India’s prohibition of imports of U.S. poultry meat and chicken eggs.  India claims the trade ban prevents transmission of avian influenza, but USTR Kirk said they have provided no scientific evidence consistent with international standards on avian influenza control. Consultations are the first step in the WTO dispute settlement process. If the consultations fail to resolve the issue within 60 days, the U.S. can request a dispute settlement panel.

The WTO’s Agreement on Sanitary and Phytosanitary Measures recognizes WTO members’ rights to adopt regulations to protect human, animal, and plant life or health, but also requires members to ensure regulations are not simply protectionism.  Secretary of Agriculture Tom Vilsack said, “Over the last few years, the United States has repeatedly asked India to justify its claim that a ban on poultry products from the United States is necessary. However, to date, India has not provided valid, scientifically-based justification for the import restrictions.”

According to estimates by the Foreign Agricultural Service of USDA for 2012, India is expected to be the sixth largest young chicken meat producer globally at 2.8 million metric tons (MMT), but far behind the U.S. at 16.6 MMT, China at 13.8 MMT and Brazil at 13.6 MMT.  India neither imports nor exports significant amounts of chicken meat. Production is expected to grow rapidly in coming years.  According to the U.S. Agricultural Attaché in India, the layer industry is growing as consumers want higher-quality, lower-cost protein.  Production is expected to grow about 6 percent in 2012, with consumption to increase to 51 eggs per person.

Since 2007, India has formally banned imports of poultry products from the U.S. to prevent outbreaks of avian influenza, even though the United States has not had an outbreak of high pathogenic avian influenza since 2004.  India claims that low pathogenic avian influenza could mutate into highly pathogenic strains.  The U.S. does have low pathogenic avian influenza.

A report by Bridges Weekly Trade News Digest clarified that issue.  “Countries have the right to impose certain restrictions,” said Alex Thiermann, President of the OIE (World Organization for Animal Health) Code Commission. “However”, he added, “the code very clearly says that low pathogenic influenza allows for trade.”  Thiermann told Bridges that, because low pathogenic forms of the virus can mutate into highly pathogenic forms, “you have to wait a certain number of days’ before importing poultry meat from a flock of birds that has had a low pathogenic strain of avian influenza.  This is because low pathogenic avian influenza is a weak virus that disappears after a short period of time,” he said.

Restricting imports of U.S. poultry products has not eliminated India’s problem with high pathogenic avian influenza.  The U.S. Attaché reported on November 30 of last year that the country had four cases in 2011, two on government-run farms and two in backyard lots.  As of March 14, the Attaché reported India has had six findings of highly pathogenic avian influenza in poultry in 2012.  None of the outbreaks have been in major poultry production areas, but some have been close, causing concern to both government and industry officials. Bangladesh is believed to be the source of some of the outbreaks.  Cases have also been identified in wild birds.

Indian actions perplexing

The Indian government’s actions are perplexing when considering the structure of the industry in India.  According to the U.S. Attaché, the highly organized “formal” broiler industry accounts for 85 percent of the nation’s output, with 60-65 percent of that integrated and the remaining 20-25 percent independent producer.  Despite the degree of industry development, industry sources estimate that live birds are over 90 percent of total retail sales.  A reasonable guess would be that zero percent of U.S. broiler imports would compete for that live market.

Indian consumers generally consider live chickens to be disease free, fresher and more hygienic.  Consumers lack confidence in handling procedures for commercially processed chickens and the conditions of the local “cold chain.”  Any imports would be targeted to the relatively small hotel, restaurant and institutional (HRI) trade.  The U.S. industry estimates potential U.S. poultry exports to India at $300 million per year.   Given the modernization of India with a growing middle class and increasing urbanization which will change consumption patterns, a consumer retail market will likely develop for processed chicken.

This appears to be an industry where some import competition would be a positive contribution to supply development to respond to future demands of consumers.  The U.S. industry produces a high quality product at reasonable costs.  They certainly know how to set up and manage cold chains.  India is like many developing countries where infrastructure development needs technology and management support.  The U.S. industry could help the HRI industry make giant strides in supply chain development for chicken meat and supply retailers when they detect changes in customers’ demands.

The consultations between the U.S. and India could be the beginning of a huge reassessment of import policies by India and other middle-income developing countries.  A shift could occur from using import policies to protect agricultural producers and existing middlemen at the expense of consumers to recognizing the needs of consumers, while increasing efficiencies in agricultural production and processing.  This would be similar to the transformation in South Korea that resulted in free trade agreements with the U.S. and the EU.  The changes could also impact middle income developing country exporters like Brazil who are interested in serving growing world markets.

This trade policy situation has the potential to be a win-win for the U.S. and India.  These problems could have been solved through negotiations if the Doha Round of talks had ever gotten serious.  The current Indian policies are relics of the past in need of updating.  The U.S. has started the process by asking for consultations that should be resolved without litigation in a WTO dispute settlement case.  All WTO members have a stake in seeing an amicable resolution.

Ross Korves is an economic policy analyst with Truth About Trade & Technology.