Cashew industry analysis and trade barriers with example

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2. The team
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KHYATI BHARDWAJ
VARUN GOLA

3. 1) What trade theories help to explain where cashew tree products have been produced
historically?
Absolute Advantage theory:
According to the theory given by Adam Smith a country may produce goods more efficiently because of a
natural advantage (e.g., raw materials or climate) or because of an acquired advantage than other country
(eg., technology or skilled labour).
Then we can say that the first country has an Absolute (Cost) Advantage in producing that good.
East African countries (Kenya
Mozambique etc) and Brazil.
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Produced more cashew nut
Natural Climatic advantage
Export of raw cashew
India Advantage in Cashew
processing (Skilled and
cheap labour)
Export of Processed cashew

4. Comparative Advantage theory:-
T
The Theory of Comparative Advantage can also be used to explain the production of Cashew trees,
The tropical countries are best suited to grow cashew trees and thus the countries exported raw
cashew nuts, on the other hand the Indian labours were efficient and excellent at the processing
of the cashew nuts thus India imported raw cashew nuts and processed it to later export it to other
countries.
But later all these countries tried to produce and process the cashew nuts in their own countries thus
other new competitor like Vietnam also joined them which is soon going to surpass every one in the
exports of processed cashew nuts.

5. Many developing countries are able to produce and/or process nuts as cheaply as
India and may,in some instances, be geographically or culturally closer to certain
markets than India.
In addition, India’s position in cashew nut production is threatened by continued
improvements in the mechanical equipment designed to replace hand processing.
All of these factors encourage new competitors to enter the market, particularly at
the processing level, thus cutting off India’s access to additional supplies and
diminishing its share of the market.
2. What factors threaten India’s future competitive position in cashew nut production?
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6. A cashew producer who competes in the high-end of the market will have a continued
advantage in the sale of higher-grade nuts until such time as newer machinery solves the
breakage problem.
In addition, Indian cashews can be differentiated because of their distinct flavor differences,
which are the result of the growing conditions and process.
Focused on quality and producers should work hard to establish a national brand identity .
However, Indian producers must at the same time develop a contingency plan for the
eventual possibility of having to replace workers with processing machines and shifting
those workers to other types of jobs.
Producers should also be proactive in terms of finding new uses for products from the
cashew tree.
Make new products from Cashew by adding value to it.
3. If you were an Indian cashew producer, what alternatives might you consider to maintain
future competitiveness?
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7. In 2018,
approximately 329
thousand metric
tons of cashew nuts
were consumed in
India which was an
increase from the
previous year,
where over 253
thousand metric
tons were
consumed.

8. Cashew exports
amounted to over
566 million U.S.
dollars from India in
fiscal year 2020.
This included
cashew kernels and
cashew nut shell
liquid. India's main
export markets for
this commodity
included South
Korea, China, Spain,
United States and
Belgium.

10. Trade barriers are government policies which place restrictions on international trade. Trade barriers can
either make trade more difficult and expensive (tariff barriers) or prevent trade completely (e.g. trade
embargo)
Tariff Barriers - These are taxes on certain imports. They raise the price of imported goods making imports
less competitive.
Non-Tariff Barriers -These involve rules and regulations which make trade more difficult. For example, if
foreign companies have to adhere to complex manufacturing laws it can be difficult to trade.
Quotas - A limit placed on the number of imports.
Voluntary Export Restraint (VER) -Similar to quotas, this is where countries agree to limit the number of
imports. This was used by the US for imports of Japanese cars.
Subsidies - A domestic subsidy from government can give the local firm a competitive advantage.
Embargo- A complete ban on imports from a certain country. E.g. US embargo with Cuba. 06

11. In 2019 50% tariff on imports of washing
machines. The US Trade body has recommended
tariffs of 50% on imports of washing machines –
especially from South Korean manufacturers IG
and Samsung. The Trade body is concerned IG
are selling washing machines below cost and
dumping surplus supply on the US market. US
manufacturer Whirlpool brought the case.
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12. As Indian government struggles to support
the domestic pulses farmers who are getting
non-remunerative prices due to the second
consecutive year of bumper production,
trade body Indian Pulses and Grains
Association (IPGA) has claimed that large
scale smuggling of pulses from
neighbouring countries is hurting the
interests of domestic farmers and
traders.India has put restrictions on the
import of pulses allocating import quotas as
the country has surplus production.
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13. The subsidies are designed to boost
exports from the world's second
biggest sugar producer though
increased shipments could put
further pressure on global prices,
which have already fallen more than
10% so far this year.India approved
an export subsidy of ₹10,448
($142.20) per tonne in the 2019/20
season which ends on Sept. 30 in a
move that helped sugar mills export a
record 5.5 million tonnes.
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14. India said the US duties of 25% and 10% on
imports of steel and aluminium products
respectively, are inconsistent with provisions of
the WTO's General Agreement on Tariffs and
Trade (GATT) 1994 and of the Agreement on
Safeguards in the request for dispute
consultations which was circulated on
Wednesday.Citing security concerns, the
Donald Trump administration imposed 25%
and 10% of additional import duty on certain
steel products and aluminum products
respectively from all countries except Canada,
Mexico, Australia, Argentina, South Korea,
Brazil and the European Union, which took
effect from March 23, 2018
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15. Example of Embargo
The impact of the ban, particularly on trade through the
Attari-Wagah border, is explained in detail by economists
Ranjit Singh Ghuman and Haqiqat Singh of the Centre for
Research in Rural and Industrial Development in a
landmark study titled ‘Indo-Pak Trade Embargo: Impact
on Punjab Economy’.The authors recount that “trade
relations between India and Pakistan have always been
governed by political relations which for most of the time
since independence have been subject to hostility and
enmity… In the past, too, there was a nine year trade
embargo between them during 1965-1974, nearly
unparalleled in the history of world trade.Dry dates,
cement, gypsum, aluminium ore, soda and limestone are
some of the major Indian imports from Pakistan through
Attari, accounting for nearly 79% of imports from
Pakistan. India’s major exports through Attari included
cotton yarn, vegetables, straw reapers and high-density
polyethylene.
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16. https://www.livemint.com/industry/agriculture/india-to-maintain-sugar-
export-subsidies-for-third-year-in-a-row-report-11599480462607.
https://economictimes.indiatimes.com/news/economy/foreign-trade/indias-
2020-21-pulses-import-may-fall-by-50-if-government-doesnt-extend-
import-quotas-says-ipga/articleshow/74132554.cms?from=mdr
https://economictimes.indiatimes.com/news/economy/foreign-trade/india-
takes-us-steel-tariffs-complaint-to-the-wto/articleshow/64292453.cms
https://www.economicshelp.org/blog/glossary/trade-barriers/
References
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