Why Tariff Cuts On US Farm Goods Could Leave Scars

In its May 2025 working paper, Promoting India–US Agricultural Trade under the New US Trade Regime, NITI Aayog recommends that India reduce import tariffs on select US agricultural produce—including rice, dairy, poultry, and GM soybeans—as part of an India–US FTA.

However, research by GTRI into historical experiences suggests otherwise.

NITI Aayog’s suggestion that India offer tariff concessions on products facing domestic supply gaps—such as edible oils—may sound practical, but it is deeply flawed. India tried this strategy in the past—and paid a heavy price.

In the 1960s and 1970s, India, heavily reliant on imports of rice, wheat, and skimmed milk powder, agreed during GATT negotiations to bind tariffs on these items at zero.

By the 1990s, having achieved self-sufficiency, these zero-duty bindings posed a significant threat to millions of Indian farmers.
To restore policy space, India invoked Article XXVIII of GATT to renegotiate tariff commitments. Although successful in raising bound tariffs on key staples like rice, wheat, and milk powder, India had to offer significant concessions in return—mainly to developed countries—by lowering bound tariffs on other items such as butter, apples, citrus fruits, and olive oil.

This opened the floodgates to subsidised imports. The lesson is clear: using trade policy to address short-term shortages can create long-term structural vulnerabilities that are hard to reverse.

NITI Aayog also proposes eliminating tariffs on rice and pepper, citing India’s large exports of these items. However, subsidised grain exports from developed countries like the US and EU have caused global grain price volatility, devastating self-sufficient farming systems in many African nations.

From 2005 to 2008, and again in 2010–11, global wheat prices spiked over 130% and maize nearly 70%, triggering food riots and forcing emergency imports and subsidies in countries like Ghana, Nigeria, and Senegal.

Equally destructive were the artificially low price periods that followed. Between 2014 and 2016, wheat prices fell below $160 per metric tonne—driven by Western subsidised surpluses. These crashes destroyed local cultivation incentives, causing farm abandonment and increased import dependency.

India, with over 100 million smallholder farmers, risks a similar fate if it dismantles tariff protections on staples like rice and wheat.
Further, slashing tariffs on rice would hand a victory to the USA Rice Federation, which has repeatedly attacked India at the WTO, accusing it of breaching subsidy limits, misusing the Peace Clause, and distorting trade via minimum support prices and public procurement.

Tariff cuts would only embolden such challenges and increase pressure on India’s food security framework.
NITI Aayog also recommends allowing dairy and poultry imports subject to US products meeting India’s sanitary and phytosanitary standards, or SPS, instead of levying tariffs.

On dairy, the US has long contested India’s SPS requirement that imported milk must come from animals not fed meat, blood, or internal organs—viewing it as an unjustified barrier.

India, however, sees this standard as essential for both public health and cultural reasons.

Replacing tariffs with weaker, challenge-prone SPS standards could erode both safety and ethical safeguards.

Moreover, while some Indian SPS measures exceed Codex standards, India’s limited technical capacity to formulate, justify, and enforce stringent SPS rules makes them a poor substitute for tariffs.

This weakness was exposed in the WTO dispute initiated by the US against India’s SPS measures related to avian flu. Furthermore, stringent SPS norms apply to both imports and domestic producers. If Indian producers cannot comply, they may be barred from their own market—giving foreign firms a free hand.

The SPS proposal, then, is poorly thought out. It would not protect Indian farmers—it would push them out of the domestic market.

Another NITI Aayog proposal involves allowing US corn imports for ethanol blending—currently banned—and permitting corn by-products such as DDGS for reprocessing and re-export, claiming GM material would be excluded from domestic use.

Similarly, it suggests importing GM soybean seeds under a controlled model: crushed at coastal sites, oil sold locally, and GM soymeal exported.

But these proposals assume India can tightly control the movement of GM materials through strict SPS protocols. In reality, enforcement is weak, supply chains are fragmented, and markets are hard to monitor.

Once GM products enter the country, the risk of leakage into domestic farming systems and food chains is high—raising serious concerns about contamination, environmental harm, and rejection by export markets.

India must think carefully before agreeing to reduce or eliminate tariffs on farm products under an India–US trade deal. Once bound in an FTA, tariffs cannot easily be raised again—even amid global disruptions, price crashes, or rural distress.

This would leave India exposed, especially as wealthy countries like the US and EU continue to heavily subsidise their own agriculture.

Tariff flexibility is not outdated protectionism—it is a prudent policy instrument to safeguard food security, rural livelihoods, and economic stability.

Once surrendered in a trade agreement, recovering that flexibility is extremely difficult.

India must hold open, transparent consultations with state governments, farmer groups, and agricultural experts before making any binding commitments. Agriculture affects nearly half the population. Policy shifts of this magnitude require rigorous evidence—not rushed moves to meet external demands.

NITI Aayog must release a comprehensive position paper on the proposed India–US FTA, clearly outlining the asymmetry in commitments. India is being asked to reduce its MFN tariffs—while the US is offering no comparable tariff concessions.

With over 700 million Indians dependent on farming, agriculture is more than just a livelihood—it is the cornerstone of rural India’s economy and food security.

Trade policy must align with India’s development goals—not be dictated by external pressures.

In an era of rising food insecurity, climate instability, and erratic global trade, India’s capacity to protect its farmers and consumers must be preserved—not traded away.