India: Partnership and progress toward market access

China Experience Proves Local Producers Can Thrive as Imports Rise

By Philip Shull

A frequent refrain from frustrated exporters to tough destinations is: “This is a market of great potential. … And it always will be!”

Philip Shull

With its huge population, rapidly growing economy, massive protein deficit, high tariffs and impossibly strict phytosanitary requirements, India has been in this category for decades. Despite promising trade missions, pressure from U.S. Department of Agriculture and U.S. Trade Representative over the years, and ready demand for our products among local processors, the India market has remained closed to U.S. Identity Preserved soy.

But this could soon change. Thanks to the initiative and strong advocacy of India’s Soy Food Promotion and Welfare Association (SFPWA, an industry group comprised of Indian processors of soy foods), access for U.S. IP soy to this long-closed market has never been closer.

Rising economic demand for protein among India’s 1.4 billion consumers has led to a sharp increase in domestic food prices. In response to this worrying development, the Indian government took the historic step in May 2021 of suspending its ban on pulse imports. This was a major development in a country where pulses are a foundational protein source and where self-sufficiency in pulses has long been a pillar of India’s agricultural policy.

Leveraging this unprecedented market opening, SFPWA wrote a letter to the Indian government requesting a 50,000-ton tariff rate quota (TRQ) for food quality soybeans. (Governments use TRQs to allow a certain amount of a given product to enter the country at a reduced tariff.)

Among other things, the letter explained that imports of IP soy would not harm Indian soy farmers because India has a large soy deficit and the characteristics and uniformity that U.S. specialty soy provides and that Indian processors need are unavailable in the domestic market.

In contrast to past market-opening efforts, SFPWA’s letter was met with an immediate and positive response from the Indian media. Dozens of articles appeared in support of the request. These media reports indicate that SFPWA’s ability to show how a TRQ could help Indian soybean farmers, as well as consumers, have led key ministries to meet with SFPWA leadership to discuss the issue. While much remains to be done and market access is not yet assured, progress toward this goal appears to be unprecedented.

SFPWA’s position is that opening the Indian market to soybeans will not harm Indian soybean farmers, and the experience of China supports this assertion. China’s decision in the 1990s to open its market to soybeans led to explosive growth in Chinese soy production, along with the historic growth in imports and consumption.

China is an especially apt case study for India because the countries share key characteristics.  Both are rapidly growing emerging markets with similar-sized populations, limited arable land and a history of strong import restrictions on soybeans. Just as importantly, both countries have experienced widespread protein deficits that harmed quality of life for their people. SFPWA believes that a TRQ for Identity Preserved soy will help improve diets throughout India. The Specialty Soya and Grains Alliance and the U.S. Soybean Export Council agree.

USDA data show that Chinese soy production rose, even as imports grew.  Today, China’s soy production (20 million tons) and imports (103 million tons) are both at or near-record levels. Meanwhile, Chinese soybean consumption rocketed from roughly 7 million tons in the 1970s to almost 120 million tons estimated in 2021 (v. 0 to 11.2 mmt for India). Consumption of soy for food rose from 6 million tons to 15 million tons during this period. This combined increase in soy consumption has contributed enormously to improvements in Chinese nutrition and quality of life during this period.

Charts linked here compare Indian and Chinese soybean imports (India, China), production (India, China), consumption (India, China), food-use consumption (India, China) and exports (India, China) over the past 50 years.

Per capita income in China and India was roughly equivalent at $500 in 2000. However, since China opened its market to soybeans, there has been a sharp divergence. While income in both countries grew strongly, India’s per capita income reached roughly $2,000 per capita in 2020, China’s grew to almost $10,000.

Bottom Line:  India remains a market of immense potential for U.S. specialty soya, and gaining access is a priority for SSGA. Given the similarities in the agricultural and consumer profiles between China and India, it is clear that Indian consumers and producers of poultry, dairy, aquaculture and soy-based foods could benefit greatly from greater access to imported soy without harm to India’s soybean farmers.

For years, SSGA and USSEC have worked intensively with the Indian soy food and feed industries to demonstrate how U.S. soy can improve diets and incomes throughout the country. We value this cooperation and applaud SFPWA for its historic initiative and unprecedented effort.

As President John Quincy Adams said, “Perseverance has a magical effect, before which difficulties disappear and obstacles vanish.”

Philip Shull is an SSGA Technical Adviser for South Asia. For 31 years he served in USDA’s Foreign Agricultural Service (FAS), opening markets for U.S. agricultural products.  He was stationed in China and greater China for 11 years (1987-92, 2006-2010, 2014-2016).