In March of 2012, U.S. Trade Representative Ron Kirk requested formal consultations with India under WTO dispute settlement provisions on India’s 2007 prohibition of imports of U.S. poultry meat and chicken eggs. The U.S. had repeatedly asked India to justify its claim that a ban on U.S. poultry products imports was necessary, but India did not provide science-based justification. After consultations were unsuccessful in the allotted 60 days, the U.S. asked the WTO to establish a panel to hear the U.S. claim that India’s import restrictions were inconsistent with its WTO commitments. The panel has ruled in favor of the U.S. on all key points.
The WTO’s Agreement on Sanitary and Phytosanitary Measures recognizes WTO members’ rights to adopt regulations to protect human, animal, or plant life or health, but also requires members to ensure regulations are not simply protectionism. There are no mysteries why the panel ruled against India. These rules apply to all WTO members, not just India. U.S. Trade Representative Michael Froman in his statement on the ruling explained exactly why India was found to be in violation of Sanitary and Phytosanitary Measure commitments.
“India’s restrictions are not base on international standards or a risk assessment that takes into account available scientific evidence; arbitrarily discriminate against U.S. products because India blocks imports while not similarly blocking domestic products; constitutes a disguised restriction on international trade; are more trade restrictive than necessary since India could reasonably adopt international standards for the control of avian influenza instead of imposing an import ban; fail to recognize the concept of disease free areas and are not adapted to the characteristics of the areas from which products originate and to which they are destined; and were not properly notified in a manner that would allow the United States and other WTO Members to comment on India’s restrictions before they went into effect.”
The SPS agreement is based on science. The U.S. has low pathogenic avian influenza, but has not had an outbreak of high pathogenic avian influenza since 2004. Low pathogenic avian influenza can mutate into highly pathogenic strains and there is a waiting time before importing poultry meat from a flock of birds that has had a low pathogenic strain. It is a weak virus that disappears after a short period of time. Domestic and imported chickens should be subjected to the same waiting time after an outbreak of low pathogenic avian influenza. There are international standards to follow for low pathogenic avian influenza without imposing a ban on imports.
Regionalization is recognized as part of an internationally acceptable plan. If a country has several production regions and some of those regions are disease-free, exports can continue from the disease-free regions. That would apply to the U.S. which has several production regions for poultry meat and eggs and not all regions have low pathogenic avian influenza at the same time. Regionalization also applies to consumption. The U.S. is struggling right now with that issue for beef. Brazil and Argentina have problems with foot and mouth disease, but have some regions considered disease-free. The U.S. has a commitment to import beef from the disease-free regions if it can do so while keeping the U.S. cattle herd disease free.
Last, but not least, India has an obligation to keep other WTO Members informed as to how it is meeting its commitments. The ban on poultry meat and eggs from the U.S. should not have happened without consultations with the U.S. Regionalization should have been considered as an alternative. India should have been prepared for a negative response from the U.S.
The U.S. did a huge favor for Indian consumers and other countries like it in bringing this case to the WTO. Countries like Korea have had to modernize domestic markets to gain free trade agreements with countries like the U.S., the EU and Australia. A successful Round of WTO negotiations could include a package of domestic reforms to complement multilateral trade reforms. Decades of domestic policies that impede trade must be pulled apart one by one or they must fall all at once. Part of the problem that Japan faces in the TPP talks is that decades of domestic policy intervention must be pulled away at once.
India is the world’s six largest consumer market for young chicken meat at 3.7 million metric ton (MMT) in 2014 according to estimates by the Foreign Agricultural Service (FAS) of USDA. That is about the same size as the Mexican market and slightly larger than the Russian market. The Indian market has been growing 6-8 percent per year and is expected to grow by 5 percent in 2015. No chicken meat is imported and a small amount is exported to neighboring countries. As of 2012 when the WTO complaint was filed, over 90 percent of the chickens where purchased live because a cold chain had not been developed. That is expected to change rapidly as the middle class continues to grow, urbanization spreads, consumers seek a more varied diets and cold chains are developed.
As the losing party, this ruling clearly puts the policy ball in India’s court. India is required to bring its measures into WTO compliance within a reasonable period of time as agreed upon by the two parties. It has 60 days to appeal the ruling, which it will most likely do. It will not achieve any major reversals, but may gain around the edges. The Appellate Body is to rule on appeals within 90 days, but almost always takes longer. India will probably make some minor changes in their market policies and contend they are in compliance. This will require a compliance review that will find India well short of the goal. A compensation determination will then be made by the WTO.
After compensation has been determined both sides will get serious. The U.S. does not want compensation; it wants access to the growing Indian poultry meat and egg markets. Other exporters also want access. As all of this is going on, India will be working behind the scene on what they can do on domestic policy to make meaningful changes and consulting with other countries with have similar problems.
This will become as broad an issue as India wants to make it. The only certain realities are that India lost a clear cut decision that puts the issue on their agenda to resolve and the U.S. and other wants additional market access to India’s growing animal protein markets.