Dairy Becomes Sticking Point in Trade Deal with India

A cargo ship loads containers for export. ( Farm Journal Media )

Dairy has once again become a major sticking point in trade negotiations between the U.S. and India, a country with 1.35 billion people. And while COVID-19 has also slowed negotiations, a mini trade deal could be in the making. 

“The United States has hungrily eyed export opportunities to the world’s second most populous country for some time, while India continues to employ both tariff and non-tariff barriers in an effort to insulate small, shareholder dairy producers from competition,” says Monica Ganley, analyst with the Daily Dairy Report and principal of Quarterra, a dairy consulting firm in Argentina. 

What makes India such a sought-after prize for dairy exporters is its rapidly growing middle class and dairy-rich diet. According to the Australian government, India’s middle class, which numbered close to 80 million in 2017, is expected to grow to 181 million by 2022. 

“While protectionist tendencies have aided milk production growth in India, ongoing gains in domestic output will likely not be large enough to meet the country’s burgeoning demand in coming years,” Ganley says. “Despite India’s longstanding self-sufficiency in dairy, demand for dairy from the country’s growing population and middle class could soon outpace the country’s milk supply, creating an exciting opportunity for U.S. dairy exporters if concessions can be gained through trade negotiations.” 

Dairy products, such as paneer, ghee and yogurt, are staples of Indian cuisine, and one of the world’s largest dairy cooperatives and dairy processors, Amul, is based in India. In a presentation detailing the impact of a potential trade deal between India and the U.S., Amul’s top executive recently argued India should exclude dairy from any trade agreement it enters into with the U.S. or any other large world supplier of dairy products.

And dairy is not the only industry or agricultural sector raising concerns. “What started out as an ambitious pursuit of a full-blown free trade agreement has gradually been scaled back due to rising concerns from the agriculture, textile, and manufacturing sectors,” Ganley notes. 

Ongoing negotiations around a mini trade deal, however, could result in about $6 billion worth of trade benefits to each party, according to a recent article in India-based The Print. This mini agreement would restore the Generalized System of Preferences (GSP) for India, a program that previously gave the country preferential tariff treatment on more than 2,000 products that it exported to the U.S. But GSP was suspended early last year, a move the United States Dairy Export Council and the National Milk Producers Federation applauded because of India’s failure to meet its trade liberalization obligations. 

“In return for the United States restoring GSP for India, the country would buy $6 billion worth of U.S. agricultural goods, including dairy,” Ganley adds.