US-Nepal trade

US-Nepal trade
TKP, 6-Apr-2010
By Donald A. Camp

The US visit of the Nepali delegation headed by Commerce Secretary Purushottam Ojha has raised expectations in Washington and in Kathmandu. That is because officials in both capitals are eager to revitalise our commercial ties, and recent trade trends tell you why. Nepal’s total exports to the United States have declined dramatically, since peaking at nearly US $230 million in 2000. Last year, they fell to US $85 million. US exports to Nepal haven’t plummeted as precipitously, but they have fallen nevertheless, from US $35.1 million in 2000 to US $31 million in 2009. Beside the international economic downturn, concerns of US investors and traders are about Nepal’s political stability, the electricity crisis, and labour unrest.

But, there are many reasons to be optimistic about reversing recent trends, which is why we have high hopes for increasing US trade with Nepal. Efforts are underway to conclude the peace process and establish stable government institutions, which are crucial for improving Nepal’s competitiveness. Nepal has also enacted a new trade policy in response to economic changes that have occurred in recent years, both inside and outside the country. Additionally, the United States will soon launch a new, multi-million-dollar development assistance programme focused on building Nepal’s trade capacity.

The trade policy the government enacted last year replaces one adopted in 1992. It is sure to strengthen trade ties with the United States, as well as other countries, because it addresses new economic realities, including the fact that some of Nepal’s traditional exports, such as ready-made garments, no longer enjoy a comparative advantage in the global market — with or without favourable tariff treatment. The updated trade policy aims to promote, in partnership with the private sector, “new exportable goods of comparative advantage.”

Fifteen “special thrust areas” have already been identified. Nepal’s advantage in terms of production is not the only thing that makes these agricultural and handicraft goods prime targets for export promotion. All of these goods also fall within the various categories of products that enjoy duty-free access to the US market under the Generalised System of Preferences (GSP). And, twelve other countries currently have GSP schemes similar to that of the United States, which provides duty-free access to about 4,800 products.

In recognition of GSP’s export-boosting potential, the new trade policy calls for converting the government-run Trade and Export Promotion Center into an autonomous Trade Promotion Institute, charged with, among other things, encouraging more Nepali businesses to capitalise on duty-free access provided by GSP. The US Embassy in Kathmandu is also committed to helping Nepal take maximum advantage of GSP and, to promote this, it is planning a workshop for late July or early August to familiarise government officials and entrepreneurs with GSP processes.

The objectives of Nepal’s new trade policy are generally aligned with those of USAID’s new Nepal Economic, Agriculture Trade (NEAT) Activity, a US $30-million, multi-year initiative designed to strengthen the foundations for rapid, sustained and inclusive economic growth. For example, both are built on the belief that increased trade can provide substantial economic benefits to traditionally disadvantaged groups and marginalised communities. They also share a “value chain” approach to trade promotion, which fosters competitiveness by increasing efficiency of the numerous linked activities required to move a product from inception to consumer. Furthermore, many of the products USAID suggested its potential partners consider are also targeted by Nepal’s new trade policy. These include coffee, tea, cardamom, honey, essential oils, pashmina, and wooden handicrafts.

In a recent newspaper interview, Secretary Ojha said, “The main objective of the visit is to get tangible and formal public and private links established so that economic engagements between the two countries could be rejuvenated.” This is a commendable objective, and the US government has worked to ensure it is achieved by arranging for the delegation to meet with senior officials at the Office of the US Trade Representative, Department of Commerce and other relevant agencies. What makes this objective most pragmatic is its recognition of the vital role public-private partnerships will play in strengthening our economic relationship, a point Secretary Ojha further underscored by inviting top officials from business associations to join his delegation.

In the lead up to the delegation’s visit, much has been written about a US-Nepal Trade and Investment Framework Agreement (TIFA). The possibility of signing a TIFA has generated enormous enthusiasm in certain sectors in Nepal. But the TIFA should not be overstated. TIFA is not a bilateral trade agreement, nor would it provide ready-made garments or other products duty-free access to the US market. TIFA provides a framework for resolving bilateral investment and trade disputes, an important and positive step, but one with limited impact on trade. Fortunately, a formal bilateral agreement is not a pre-requisite for revitalising trade between our two countries. The tools we need are already at our disposal, and we are committed to working with Secretary Ojha and his delegation to ensure they are put to good use.

Camp is Chargé d’Affaires, US Embassy, Kathmandu

India to review Nepal policy

India to review Nepal policy
Nepalnews.com, 14-Oct-07

In the changing context of Nepali politics, the Indian government has begun discussion on possible amendment of its policy on Nepal.

Gopal Khanal writes in The Kathmandu Post from New Delhi that experts on Nepal have been given the responsibility to suggest to the government on the kind of strategy that India must adopt taking into consideration the changing political spheres in Nepal.

The experts have been asked to answer on Indian influences in Nepal's Terai community, impact on India due to change in Nepali politics and basis of Nepal-India relation in newer context. The government has also asked the experts if the 1950 bilateral treaty is still relevant.

The communist groups in Nepal have long advocated amendment in the 1950 treaty to which India had not paid attention. Former prime minister Man Mohan Adhikari had formally asked the Indian government to review the treaty.

India has taken steps to review the treaty after it revived the bilateral treaty with Bhutan.

Khanal writes that the experts have also been told to find answers on what the ground would be for Nepal-India relations if Maoists win in the upcoming constituent assembly elections.

This is the first time than India has begun massive change in its policies towards Nepal after India’s independence in 1947.

BIMSTEC agrees on negative list, value addition criteria

BIMSTEC agrees on negative list, value addition criteria
eKantipur.com, 28-Sep-2007

Trade negotiators from seven BIMSTEC member countries have agreed on value addition conditions and downsizing of the negative list in Dhaka, bringing the free trade agreement on trade in goods close to conclusion.

Value addition and negative list were the two most contested issues and the delay in reaching a consensus in those had been delaying finalization of the accord. Nepal, India, Bangladesh, Bhutan, Sri Lanka, Thailand and Myanmar are members of BIMSTEC.

"In a bid to render free trade successful, trade negotiators agreed to downsize the negative list to 15 percent from 25 percent," said a Commerce Ministry official.

Talking to the Post, he elaborated that the consensus was reached as a middle path to the Thailand's proposal of reducing it to 10 percent and other members' proposal to maintain it at 20.

With the agreement, the BIMSTEC free trade agreement on goods would now have only 15 percent of the total 5,226 tariff lines in the negative list. That means, free trade rules will not be applicable to 784 tariff lines that the members would enlist in the negative list.

The 15th TNC meeting also agreed on 35 percent value additional requirement for products by developing members and 30 percent for the least developed country members to enjoy market access under free trade rules in the bloc.

The agreement was reached by compromising on the proposals that the LDCs and Thailand, and other developing members had pushed for. Thailand and the LDCs had pushed for a 30 percent value addition criteria while the other developing members 40 percent for accepting the products as originating from the developing members.

However, no such compromise was made on value addition criteria for LDCs. The LDCs had demanded that they be allowed to enjoy the facility with at least 25 percent value addition.

The meeting also finalized the modalities for tariff cut, under which LDCs would be required to reduce their tariff in a span of ten years and the developing countries would need to do that within 3 years for LDCs and 5 years for other developing members.

"Except for a few issues, the free trade accord for trade in goods is almost final," said the official. He added that the TNC would meet next in New Delhi on November 12-15 to finalize the issues agreed upon.

Officials said that they were optimistic of the New Delhi meeting finalizing the accord and forwarding it to the higher body for its official endorsement in the Summit. The BIMSTEC Summit has been scheduled for February 2008.

BIMSTEC members still divided

BIMSTEC members still divided
eKantipur.com, 29-Jun-07

Despite earlier understanding, seven member countries of South-Southeast Asian economic bloc including Nepal stand wide apart on value addition condition and negative list for free trade within the bloc.

The differences surfaced after Thailand, contrary to previous understanding, pushed for 30 percent flat value addition condition for all at the 14th meeting of BIMSTEC Trade Negotiating Committee, said a participant of the meeting.

Previously, all members had agreed for different rate of value addition for developing and LDC members -- 35 percent for developing countries and lower for LDCs.

While developing countries -- India, Thailand, Sri Lanka and Myanmar -- had pushed for 30 percent value addition for LDCs, LDCs including Nepal, Bangladesh and Bhutan, were seeking to fix it at 25 percent.

Senior officials from BIMSTEC member countries, who met in Thimpu last week, also failed to converge on volume of items to be listed under the negative list.

Nepal and other South Asian members stood firm on their position to retain 20 percent of total tradable items into the negative list. "Thailand, on the other hand, demanded that it be brought down at 10 percent," said the source. Negative list would include items on which tariff would not be reduced.

Likewise, they failed to reach consensus on safeguard measures.

"Consensus on issues such as customs cooperation and trade facilitation was reached," said the source. The officials decided to meet next in Dhaka from September 24 to 26 to iron out differences. They also agreed to continue negotiations on agreement for services and investment side by side of trade in goods from the next meeting.

BIMSTEC ratified framework agreement for FTA in trade in goods and trade in services and investment in February 2004.

However, failing to finalize the agreement, it missed the agreed date of enforcement of FTA on commodity trade in July 2006.

Given the pace of negotiations, it is further set to miss the date of enforcing FTA on trade in services and investment in July 2007. Under the broader principles, BIMSTEC members have agreed to trade goods under the 'fast track' and 'normal track' of trade liberalization.

Under the fast track, members would bring down the tariffs in the range of zero to 5 percent by June 2009 for developing countries and June 2011 for least developed countries. In the case of normal track, they will follow a gradual tariff liberalization programs.

The developing countries will have to comply with it by June 2010 for each other and 2012 for least developed members. While for LDC members, the compliance deadline is July 2017 for developing countries and June 30, 2015 for each other.

Experts suggest 1950 treaty review

Experts suggest 1950 treaty review
eKantipur.com, 22-April-2007

Considering the "changing relations" between Nepal and India, policy experts of both countries have requested the respective governments to review the provisions of the Peace and Friendship Treaty of 1950 as well as the 1947 Tri-partite Treaty on Gurkha soldiers.

Summing up the two-day international conference on ''India-Nepal Relations: Looking at the Future'', on Saturday, they reiterated that relations between the two countries should be reviewed and renewed on the basis of Nepal's transition to new a political system and federal structure.

The 10-point recommendation prepared by experts with inputs from government officials includes development of physical infrastructure along the border and institutional linkages between the two countries, especially in social development, including in the field of health and education.

''Given the changes that are visible at all levels of relationship between India and Nepal, there may be a need to review the provisions of the 1950 Peace and Friendship Treaty, as well as the 1947 Tri-partite treaty on Gurkha soldiers'' experts have concluded.

The conference - organized by India's foreign policy think tank, the Indian Council of World Affairs (ICWA) - was participated in by Nepal's former foreign minister and ex-ambassador to India Bhekh Bahadur Thapa; academicians Dr Chaitanya Mishra, Dr Bishwambhar Pyakuryal, Dr Puskar Bajracharya and Prof Ajaya Bhadra Khanal from Nepal. Those participating from the Indian aide were Pankaj Saran, Joint Secretary -North at the Ministry of External Affairs; academician Mahendra P Lama; Director General of ICWA Talmiz Ahmad; Former Foreign Secretary Shashank; and former Indian ambassador to Nepal MK Rasgotra, among others.

The experts recommended that the border should be made a point of opportunity rather than a corridor of vice. "The border may be treated from a larger perspective of variety of exchanges and movements," they said.