WTO Norms and Indian Dairy Industry | Animal Husbandry & Veterinary Science Optional for UPSC PDF Download

World Trade Organization (WTO) Norms and Impact on the Indian Dairy Industry

 Introduction to WTO Impact:

• Following the Uruguay Round of Multilateral Trade Negotiations in 1994, India, as a signatory, has gradually opened its dairy sector to global markets. The regulations set by the WTO can influence the Indian dairy industry in two significant ways. 

Competition with Major Producers: 

• Firstly, Indian dairy products may face competition from leading producers of processed dairy items like the European Union, the United States, and countries in Oceania such as Australia and New Zealand. 

Import Competition: 

• Secondly, in the absence of import restrictions, local dairy products might have to compete with cheaper imported alternatives. Consumers in India may show a preference for lower-priced imported dairy goods. This shift could disrupt the pattern of dairy industry growth, impacting income distribution and potentially causing social unrest.

World Milk Production Statistics

Global Milk Production: 

• According to data from the Food and Agriculture Organization (FAO), out of the worldwide milk production of 556 million tonnes, approximately two-thirds is concentrated in developed nations. 

Regional Breakdown: 

• The former East European bloc and Western Europe jointly contribute 18%, while South Asia, including India, contributes 17%. North America, Canada, and Central America produce 24%, Oceania countries generate 4%, with the remainder coming from other global regions.

International Milk Trade

Global Milk Trade: 

• Only a small portion, around 5-6%, of total milk production is traded globally. Notably, liquid milk is generally not traded, with the focus instead on processed dairy products like skimmed milk powder, whole milk powder, butter, ghee, and cheese. 

Major Players: 

• More than 90% of processed dairy products are manufactured by major players such as the EU, the US, India, Pakistan, Brazil, Poland, Australia, and New Zealand. The demand for these products primarily originates from a select few nations, with about 75% of the demand coming from 8-9 countries.
• By understanding these dynamics, it becomes clear that the global market forces and WTO regulations play a crucial role in shaping the landscape of the Indian dairy industry, necessitating strategic measures to safeguard its interests and ensure sustainable growth.

WTO Provisions

Objective: Enhancing competition and efficiency in dairy product markets through multilateral negotiations and measures adopted in 1994 by WTO signatories. 

• Liberalizing trade and government policies to boost global import demand for dairy products. Commitments on market access, reducing domestic support, and subsidies on exports to eliminate distortions in domestic markets. India, as a WTO signatory, has removed quantitative restrictions on 714 items.

Impact of WTO Provisions on Indian Dairy Industry

Short-term Impact: Certain provisions like domestic support and export subsidies may not immediately harm the Indian dairy sector. 

• The Agreement on Agriculture specifies that these provisions apply only to select dairy products, with limited impact on key products. 
• India's minimal presence in SMP and WMP trade reduces the direct impact of export subsidies. 
• However, changes in import demand could influence the Indian dairy market.

Long-term Considerations: Reduction in export subsidies by developed nations could raise world prices, potentially benefiting domestic products like butter. 

• The impact of these provisions hinges on global price trends. 
• Concerns regarding market access, removal of QRs, non-tariff barriers, and GMO issues persist.

Opportunities for Indian Dairy Industry

Market Dynamics: The global dairy market structure, influenced by oligopoly and oligopsony, raises questions about the effectiveness of WTO provisions in promoting competition. 

• Countries like New Zealand benefit from their cost-effective dairy production, gaining a competitive edge.

Tariff Considerations: India's agreement to zero tariffs on SMP imports may disrupt domestic dairy product pricing. 

• Advocacy for tariffs based on price differentials could stabilize the market. 
• Countries like New Zealand and Australia impose tariffs on SMP to protect their industries.

Strategies for Indian Dairy Industry

Production Efficiency: Minimizing production costs to enhance competitiveness and shield against cheaper imports. 

• Enhancing export potential by bridging the cost-price gap.
•  Emphasizing systematic and scientific dairy development approaches.

Non-Tariff Barriers and Quality Standards

Market Entry Challenges: Non-tariff barriers, including technical regulations and quality standards, pose obstacles for Indian dairy exports. 

• Developed countries impose strict quality norms, product specifications, and sanitary regulations. 
• Adaptation to mechanized milking and stringent processing requirements becomes crucial for market access.

By navigating these challenges and leveraging opportunities, the Indian dairy industry can enhance its global competitiveness and ensure sustainable growth in alignment with WTO provisions.