Dairy Diplomacy: Inside the US–India Trade Talks and the Growing WTO Dispute

As India prepares for another round of high-stakes trade negotiations with the United States, a parallel development is unfolding at the World Trade Organization (WTO) that could impact billions in agricultural exports. The United States has formally raised concerns over India's restrictive dairy import certification process, calling it a non-tariff barrier that violates international trade norms.

While trade talks between the two countries are meant to focus on technology, services, and defense cooperation, this resurfaced dairy dispute could disrupt the broader economic conversation. For India, the implications are far-reaching—not just for its dairy sector but also for its standing in multilateral trade bodies and bilateral strategic alliances.

What Triggered the Latest Dispute?

At the heart of the issue is India's strict sanitary and phytosanitary (SPS) certification requirement, which mandates that all imported dairy products must come from animals not exposed to hormones or animal-derived feed. The United States Trade Representative (USTR) argues that this effectively blocks US dairy exports, especially since American dairy cattle are routinely fed with such supplements, considered safe under US and international standards.

In its latest submission to the WTO Committee on Sanitary and Phytosanitary Measures, the USTR stated that “India’s certification regime is unnecessarily trade-restrictive and lacks scientific justification,” urging India to align its regulations with Codex Alimentarius norms—the globally recognized standards by the Food and Agriculture Organization (FAO) and World Health Organization (WHO).

Read the official WTO statement here.

India’s Position: Food Safety and Cultural Sensitivity

India, for its part, has maintained that its regulations are driven by public health concerns, religious sensitivities, and consumer safety expectations. The majority of Indian consumers follow vegetarian dietary habits, and there is widespread resistance to any traces of animal-origin feed in dairy products.

Indian trade officials argue that the US stance ignores domestic cultural contexts and India’s sovereign right to regulate food safety. A senior official from the Ministry of Commerce noted during the last WTO session:

“India is not against trade. We are in favor of safe trade. Our domestic consumers expect a higher standard when it comes to dairy, and we are obliged to reflect that in our certification norms.”

This principled stance, however, has led to tensions with major exporting nations and could become a sticking point in larger US–India trade agreements.

What’s at Stake for Indian Dairy Exporters?

Although the current WTO dispute focuses on imports, the ripple effect could seriously impact India’s global dairy ambitions. India is the world’s largest producer of milk, with a growing emphasis on value-added dairy exports such as paneer, ghee, and infant nutrition products.

The US dairy lobby, led by groups like the National Milk Producers Federation (NMPF) and US Dairy Export Council (USDEC), is pushing for retaliatory measures unless India eases its rules. This includes demands for reciprocal restrictions on Indian dairy goods entering the US.

If these barriers are implemented, Indian exporters could face:

• Higher tariff rates or import quotas

• More stringent documentation and inspection

• Reputational damage in high-margin Western markets

Given that the Indian dairy sector employs over 80 million farmers, mostly in rural areas, such outcomes could hurt livelihoods and derail rural development programs.

Learn more about Indian dairy export statistics from APEDA.

The Bigger Picture: Agricultural Trade Trends in Focus

This dairy standoff is emblematic of a broader agricultural trade divide between developed and developing economies. Countries like India often defend sovereign control over food systems and demand protection for small farmers, while developed nations advocate for market access and regulatory harmonization.

Moreover, agriculture continues to be a sensitive issue in bilateral trade talks—not just between India and the US but also with the EU, Australia, and Canada. In recent Free Trade Agreement (FTA) negotiations, Indian negotiators have often pushed back against pressure to liberalize the dairy and poultry sectors.

The US–India Trade Policy Forum, scheduled to meet later this month in Washington D.C., is expected to address this dairy impasse. A breakthrough could unlock stalled discussions on:

• Cross-border data flows

• Duty reductions on tech equipment

• Streamlining pharmaceutical exports

• Market access for renewable energy technology

Failure to find a middle ground, however, may spill over into geostrategic cooperation, including QUAD initiatives, critical minerals deals, and defense co-production.

Follow ongoing trade policy updates via USTR.gov.

Strategic Diplomacy: Can Both Sides Compromise?

Despite rising tensions, there remains scope for a technical compromise. Trade analysts suggest a possible path forward may involve:

• Creating a dual certification standard, one for general imports and another for culturally sensitive markets

• Allowing state-level or bilateral certifications under mutually agreed lab testing norms

• Conducting joint scientific reviews under WTO’s SPS frameworks

India has previously demonstrated flexibility in resolving WTO disputes through negotiation, notably during the solar power equipment row and the poultry import ban dispute with the US.

Professor Arvind Panagariya, former Vice Chairman of NITI Aayog, recently commented in a column for The Indian Express:

“India must balance the interests of its dairy farmers with its larger economic interests. A calibrated opening of the dairy sector, especially for non-sensitive products, can benefit consumers without hurting producers.”

Industry Reaction: Mixed Signals from the Dairy Sector

Within India, the reaction from the dairy industry has been cautious. While cooperatives like Amul and Mother Dairy support protective measures, some private exporters see potential in relaxed regulations that allow reciprocal access to the US and EU markets.

A senior executive at a Delhi-based dairy export company stated:

“If we want to be a $100 billion agri-export economy, we must learn to comply with global norms, just as we ask others to meet ours.”

This sentiment is gaining ground as value-added dairy products such as probiotic yogurts, cheeses, and protein powders find growing demand in Europe and the US.

For export readiness guides, check FSSAI’s portal for international trade.

Conclusion: More Than Just Milk

The US–India dairy dispute may appear technical, but it underscores a deep and ongoing clash between public health, cultural values, and trade liberalization. How the two nations resolve this issue will set a precedent for future agricultural negotiations and could even shape the global conversation around ethical trade practices.

As India’s trade delegation heads to Washington, negotiators will need to weigh the realpolitik of trade-offs. A rigid stance risks diplomatic friction and trade retaliation, while over-flexibility could ignite backlash from domestic farmer lobbies.

Finding the balance between tradition and transformation will be India’s biggest challenge—and perhaps its greatest diplomatic test.