Trump wants India to buy US corn – but here’s why it probably won’t

Will India refuse even a while of the US corn offer?

That’s the issue Howard Lutnick, the Commerce Secretary of the United States, recently brought up in a way of criticism regarding the trade policies of India, attacking the market limitations there. In another interview, Lutnick blamed India for shutting the doors to US farmers and instructed to open the market by way of some kind of quota systems and limits.

The main subject in Donald Trump’s battle with China is the competition in the area of agriculture, which is affected during the ongoing trade war. The imposed tariffs are the main reason behind this issue. President Trump persistently labels India as a “tariff king” and even as a “big abuser” in the trade with other countries. In the last couple of years, one of the major projects for the US government has been to get a piece of the pie of the Indian agri-sector market.

Indian authorities have tried hard to protect the sector, bringing in arguments like food security, employment opportunities, and the interests of millions of small farmers. Unquestionably, one of India’s most remarkable achievements is the agricultural revolution and self-sufficiency in food production, which still remains unparalleled even today. During the 50s and 60s period, India was mere food-dependant and the help of the worldwide food aid was the only way to survive through the acute famine.

This trend, however, was reversed by the development of improved crop varieties, which opened the door to the successful Green Revolution. Now, India is not just feeding its people but it has become a net exporter of grains, fruits, and dairy. Currently, it ranks eighth globally as an exporter of agricultural goods. Apart from being a food maker of such dimensions, there are still gaps in India’s agricultural sector in terms of productivity, infrastructure, and market access. Whereas global price volatility and climate change act as adversity. India has not been able to increase their crop production sufficiently.

Exploiting small land plots has dumped the problem on their doorstep – Indian farmers used to operate on far less than 1 hectare on average, the number was approx 46 hectares for their US peers in 2020.The surprise is the fact that productivity mainly in agriculture is still low despite the fact that this sector is the last region employing nearly more than 700 million

people in India, which is about 1/2 of countries’ populations. Agricultural sector offers one of the biggest opportunities of employment and generates up to 50% of the workforce but the contribution to GDP is minimal.

However, only less than 2% of the whole population in the US depends on farming activities. Many people are thrown into low-paid farm work due to few opportunities in the industry which is unusual for a country in the phase of development. These politics are in fact being guided by the lack of balance inherent in their national economy. India is a trade surplus nation but it follows the policy of procurement at high tariffs to save its farmers from the issue of imported cheap food.

Throughout the country, the prevailing import tariffs, which range from zero to 150%, are on average, in sum, moderate to high. According to GTRI, in New Delhi, the average weighted tariff is more than 37.7% besides zero to 5.3% in the US.

US and India have a very modest trade value when it comes to farms, which is only $8bn. India mainly exports rice, shrimp, honey, vegetable extracts, castor oil, and black pepper, while the US sends almonds, walnuts, pistachios, apples, and lentils. But as the two countries negotiate a trade deal, experts comment that Washington is intending to promote “big-ticket” farm exports – wheat, cotton, corn, and maize – to narrow its $45bn trade deficit with India.

“They’re not looking to export berries and stuff this time. The game is much bigger,” says Biswajit Dhar, a trade expert from the Delhi-based Council for Social Development think tank. Experts argue that demanding Indian farmers to apply farm tariffs, lower prices of crops, introduce GM crops, and open doors to dairy products is unjustified in global agriculture due to the fundamental asymmetry. The US government, for example, heavily subsidizing gratuities in agriculture protects farmers through crop insurance.

“In some cases,” says Ajay Srivastava of GTRI, “US subsidies exceed 100% of production costs, creating an uneven playing field that could devastate India’s smallholder farmers.” Abhijit Das, former head of the Centre for WTO Studies at the Indian Institute of Foreign Trade, says “the key thing to remember is that agriculture in the two countries is entirely different”. “The US has commercial agriculture, while India relies on intensive, subsistence farming. It’s a question of the livelihoods of millions of Indians versus the interests of US agribusiness.”

However, the ideological struggle to permanence is not the only catastrophic source of India’s agriculture. Mr. Dhar says, “The less fortunate part of the problems is because of its misconduct. Farming has long been underfunded, receiving less than 6% of India’s total investment – funds meant for infrastructure, machinery, and other long-term assets crucial for growth.”

To save the means of livelihood of millions of people, the government applies import duties and pegs the prices of wheat, rice, and dairy at a certain level.> “That’s not enough to comfort market participants,” he adds. Indeed, many years back, farmers numbering many tend to have utilized protest as a means of demanding they be given the right prices and the minimum government support that they require for wheat and rice as their major crops.

“But those relatively well-to-do farmers selling the surplus are at the same time in no position to see a breakthrough. And, if they have similar feelings, you comprehend the conditions of the extremely poor farmers,” Mr Dhar says. Prospects of agricultural negotiations becoming more complex are heightened by trade disputes.